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." Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 10.20%. Permian Basin Royalty Trust owns overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 14.49. The average volume for Permian Basin Royalty has been 141,200 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $661.8 million and is part of the energy industry. Shares are up 11% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Permian Basin Royalty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in net income 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:
- PBT's very impressive revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues leaped by 72.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- PBT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PERMIAN BASIN ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 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 74.7% when compared to the same quarter one year prior, rising from $6.70 million to $11.70 million.
- The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 96.41% significantly outperformed against the industry.
- You can view the full Permian Basin Royalty Ratings Report.
- The revenue growth came in higher than the industry average of 10.3%. 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 29.62%.
- You can view the full Whitestone REIT Ratings Report.
- The revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 31.9%. 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 TICC CAPITAL CORP is currently very high, coming in at 79.09%. It has increased significantly from the same period last year. Along with this, the net profit margin of 46.27% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 113.22% to $18.56 million when compared to the same quarter last year. In addition, TICC CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 9.71%.
- TICC CAPITAL CORP's earnings per share declined by 43.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TICC CAPITAL CORP reported lower earnings of $1.11 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $1.11).
- In its most recent trading session, TICC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 TICC Capital Ratings Report.
- Our dividend calendar.