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." Rayonier (NYSE: RYN) shares currently have a dividend yield of 4.20%. Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company has a P/E ratio of 22.44. The average volume for Rayonier has been 652,100 shares per day over the past 30 days. Rayonier has a market cap of $5.9 billion and is part of the materials & construction industry. Shares are up 11.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Rayonier as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Net operating cash flow has increased to $99.27 million or 10.72% when compared to the same quarter last year. Despite an increase in cash flow, RAYONIER INC's cash flow growth rate is still lower than the industry average growth rate of 27.25%.
- RYN, with its decline in revenue, underperformed when compared the industry average of 10.1%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAYONIER INC's return on equity exceeds that of both the industry average and the S&P 500.
- RAYONIER INC 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 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, RAYONIER INC increased its bottom line by earning $2.54 versus $2.11 in the prior year. For the next year, the market is expecting a contraction of 24.0% in earnings ($1.93 versus $2.54).
- The share price of RAYONIER INC has not done very well: it is down 22.57% 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.
- You can view the full Rayonier Ratings Report.
- Net operating cash flow has slightly increased to $319.80 million or 4.99% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.14%.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, WINDSTREAM HOLDINGS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- The gross profit margin for WINDSTREAM HOLDINGS INC is rather high; currently it is at 52.84%. Regardless of WIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WIN's net profit margin of 1.09% is significantly lower than the industry average.
- WIN, with its decline in revenue, slightly underperformed the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full Windstream Holdings Ratings Report.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- NUSTAR ENERGY LP 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 year. We feel that this trend should continue. During the past fiscal year, NUSTAR ENERGY LP continued to lose money by earning -$2.89 versus -$3.05 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus -$2.89).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 61.8% when compared to the same quarter one year prior, rising from $24.57 million to $39.74 million.
- NS, with its decline in revenue, underperformed when compared the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 14.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for NUSTAR ENERGY LP is rather low; currently it is at 17.45%. Regardless of NS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.68% trails the industry average.
- You can view the full NuStar Energy L.P Ratings Report.
- Our dividend calendar.