While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Buy." Cracker Barrel Old Country Store (NASDAQ: CBRL) shares currently have a dividend yield of 4.20%. Cracker Barrel Old Country Store, Inc. develops and operates the Cracker Barrel Old Country Store concept in the United States. It operates full-service restaurants, which provide breakfast, lunch, and dinner. The company has a P/E ratio of 18.65. The average volume for Cracker Barrel Old Country Store has been 204,800 shares per day over the past 30 days. Cracker Barrel Old Country Store has a market cap of $2.3 billion and is part of the leisure industry. Shares are down 13.2% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Cracker Barrel Old Country Store as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, reasonable valuation levels, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- CRACKER BARREL OLD CTRY STOR has improved earnings per share by 5.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CRACKER BARREL OLD CTRY STOR increased its bottom line by earning $4.89 versus $4.41 in the prior year. This year, the market expects an improvement in earnings ($5.72 versus $4.89).
- The gross profit margin for CRACKER BARREL OLD CTRY STOR is rather high; currently it is at 67.62%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.30% trails the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 5.4% when compared to the same quarter one year prior, going from $35.17 million to $37.06 million.
- You can view the full Cracker Barrel Old Country Store Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 19.5% when compared to the same quarter one year prior, going from $23.42 million to $27.99 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- GEO GROUP INC has improved earnings per share by 18.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GEO GROUP INC reported lower earnings of $1.64 versus $2.37 in the prior year. This year, the market expects an improvement in earnings ($1.81 versus $1.64).
- GEO has underperformed the S&P 500 Index, declining 9.34% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Geo Group Ratings Report.
- The revenue growth greatly exceeded the industry average of 30.1%. Since the same quarter one year prior, revenues slightly increased by 6.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- PG&E CORP's earnings per share declined by 10.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, PG&E CORP reported lower earnings of $1.84 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($3.02 versus $1.84).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Multi-Utilities industry. The net income has decreased by 5.0% when compared to the same quarter one year ago, dropping from $242.00 million to $230.00 million.
- The gross profit margin for PG&E CORP is currently lower than what is desirable, coming in at 27.29%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.91% significantly trails the industry average.
- In its most recent trading session, PCG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
- You can view the full PG&E Ratings Report.
- Our dividend calendar.