Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."Starwood Property (NYSE: STWD) shares currently have a dividend yield of 7.90%. Starwood Property Trust, Inc. originates, acquires, finances, and manages commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments in the United States and Europe. The company has a P/E ratio of 12.39. The average volume for Starwood Property has been 2,352,000 shares per day over the past 30 days. Starwood Property has a market cap of $5.4 billion and is part of the real estate industry. Shares are down 12.6% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, compelling growth in net income, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- STWD's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 103.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- STARWOOD PROPERTY TRUST INC has improved earnings per share by 29.8% 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, STARWOOD PROPERTY TRUST INC increased its bottom line by earning $1.83 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $1.83).
- 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 93.8% when compared to the same quarter one year prior, rising from $62.24 million to $120.60 million.
- The gross profit margin for STARWOOD PROPERTY TRUST INC is rather high; currently it is at 52.84%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, STWD's net profit margin of 70.09% significantly outperformed against the industry.
- You can view the full Starwood Property Ratings Report.
- The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 25.0%. 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.
- MEDICAL PROPERTIES TRUST has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.59 versus $0.54 in the prior year.
- 39.26% is the gross profit margin for MEDICAL PROPERTIES TRUST which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MPW's net profit margin of 9.90% is significantly lower than the industry average.
- The share price of MEDICAL PROPERTIES TRUST has not done very well: it is down 21.64% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 72.3% when compared to the same quarter one year ago, falling from $26.16 million to $7.24 million.
- You can view the full Medical Properties Ratings Report.
- Net operating cash flow has significantly increased by 50.43% to $63.46 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.73%.
- The gross profit margin for ALLIANCEBERNSTEIN HOLDING LP is currently very high, coming in at 100.00%. AB has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, AB's net profit margin of 87.40% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.2%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- ALLIANCEBERNSTEIN HOLDING LP reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ALLIANCEBERNSTEIN HOLDING LP increased its bottom line by earning $1.72 versus $0.50 in the prior year. This year, the market expects earnings to be in line with last year ($1.72 versus $1.72).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Capital Markets industry and the overall market, ALLIANCEBERNSTEIN HOLDING LP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full AllianceBernstein Holding L.P Ratings Report.
- Our dividend calendar.