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." Golar LNG (NASDAQ: GLNG) shares currently have a dividend yield of 4.10%. Golar LNG Limited, a midstream liquefied natural gas (LNG) company, is engaged in the transportation, regasification and liquefaction, and trading of LNG. The company operates in two segments, Vessel Operations and Commodity Trading. The company has a P/E ratio of 27.49. The average volume for Golar LNG has been 948,200 shares per day over the past 30 days. Golar LNG has a market cap of $3.5 billion and is part of the transportation industry. Shares are up 20.4% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Golar LNG as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, GLNG has a quick ratio of 1.86, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to its closing price of one year ago, GLNG's share price has jumped by 28.78%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- GLNG, with its very weak revenue results, has greatly underperformed against the industry average of 3.3%. Since the same quarter one year prior, revenues plummeted by 80.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for GOLAR LNG LTD is currently extremely low, coming in at 9.78%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 21.82% has significantly outperformed against the industry average.
- Net operating cash flow has significantly decreased to $10.25 million or 89.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Golar LNG Ratings Report.
- Net operating cash flow has significantly increased by 107.48% to $8,231.00 million when compared to the same quarter last year. In addition, BP PLC has also vastly surpassed the industry average cash flow growth rate of 18.91%.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
- The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.3%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full BP Ratings Report.
- NHI's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 59.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NATIONAL HEALTH INVESTORS has improved earnings per share by 42.0% 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, NATIONAL HEALTH INVESTORS increased its bottom line by earning $2.73 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($3.23 versus $2.73).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 49.5% when compared to the same quarter one year prior, rising from $15.74 million to $23.53 million.
- The gross profit margin for NATIONAL HEALTH INVESTORS is currently very high, coming in at 71.01%. It has increased significantly from the same period last year. Along with this, the net profit margin of 54.35% significantly outperformed against the industry average.
- Net operating cash flow has increased to $28.88 million or 21.09% when compared to the same quarter last year. In addition, NATIONAL HEALTH INVESTORS has also modestly surpassed the industry average cash flow growth rate of 18.83%.
- You can view the full National Health Investors Ratings Report.
- Our dividend calendar.