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." Whitestone REIT (NYSE: WSR) shares currently have a dividend yield of 8.10%. WhiteStone REIT is a Maryland REIT engaged in owning and operating commercial properties in culturally diverse markets in major metropolitan areas. The company has a P/E ratio of 56.16. The average volume for Whitestone REIT has been 93,800 shares per day over the past 30 days. Whitestone REIT has a market cap of $314.6 million and is part of the real estate industry. Shares are up 4.7% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Whitestone REIT as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 28.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WHITESTONE REIT reported significant earnings per share improvement 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, WHITESTONE REIT increased its bottom line by earning $0.21 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($0.23 versus $0.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 149.9% when compared to the same quarter one year prior, rising from $0.95 million to $2.37 million.
- Net operating cash flow has significantly increased by 52.07% to $5.98 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.83%.
- You can view the full Whitestone REIT Ratings Report.