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."Macquarie Infrastructure (NYSE: MIC) shares currently have a dividend yield of 6.20%. Macquarie Infrastructure Company LLC, through its subsidiaries, owns, operates, and invests in infrastructure businesses that provide services to businesses and individuals primarily in the United States. The company has a P/E ratio of 71.01. The average volume for Macquarie Infrastructure has been 247,200 shares per day over the past 30 days. Macquarie Infrastructure has a market cap of $3.4 billion and is part of the transportation industry. Shares are up 12.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Macquarie Infrastructure as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- MACQUARIE INFRASTRUCT CO LLC 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, MACQUARIE INFRASTRUCT CO LLC increased its bottom line by earning $0.60 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($1.26 versus $0.60).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Transportation Infrastructure industry. The net income increased by 246.9% when compared to the same quarter one year prior, rising from $5.87 million to $20.37 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 4.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has significantly increased by 75.46% to $59.08 million when compared to the same quarter last year. In addition, MACQUARIE INFRASTRUCT CO LLC has also vastly surpassed the industry average cash flow growth rate of -5.69%.
- 41.53% is the gross profit margin for MACQUARIE INFRASTRUCT CO LLC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MIC's net profit margin of 7.37% significantly trails the industry average.
- You can view the full Macquarie Infrastructure Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 8.5%. 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.
- VENTAS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, VENTAS INC increased its bottom line by earning $1.66 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.66).
- The net income growth from the same quarter one year ago has 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 7.9% when compared to the same quarter one year prior, going from $112.19 million to $121.05 million.
- Net operating cash flow has increased to $284.42 million or 23.49% when compared to the same quarter last year. Despite an increase in cash flow, VENTAS INC's average is still marginally south of the industry average growth rate of 27.25%.
- You can view the full Ventas Ratings Report.
- The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 13.9%. 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.
- The gross profit margin for APOLLO INVESTMENT CORP is currently very high, coming in at 70.09%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 72.51% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income increased by 6.2% when compared to the same quarter one year prior, going from $65.82 million to $69.91 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, APOLLO INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- APOLLO INVESTMENT CORP' earnings per share from the most recent quarter came in slightly below the year earlier 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, APOLLO INVESTMENT CORP increased its bottom line by earning $1.17 versus $0.49 in the prior year. For the next year, the market is expecting a contraction of 24.8% in earnings ($0.88 versus $1.17).
- You can view the full Apollo Investment Ratings Report.
- Our dividend calendar.