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 7.80%. 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 12.51. The average volume for Starwood Property has been 2,310,200 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 11.9% year-to-date as of the close of trading on Thursday. 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 10.3%. 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.
- BCE's revenue growth has slightly outpaced the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 48.38% is the gross profit margin for BCE INC which we consider to be strong. Regardless of BCE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BCE's net profit margin of 12.70% compares favorably to the industry average.
- BCE INC has improved earnings per share by 8.2% in the most recent quarter compared to 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, BCE INC reported lower earnings of $2.54 versus $3.17 in the prior year.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 8.2% when compared to the same quarter one year prior, going from $599.00 million to $648.00 million.
- Even though the current debt-to-equity ratio is 1.30, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.46 is very low and demonstrates very weak liquidity.
- You can view the full BCE Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has increased to $186.90 million or 18.36% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.08%.
- TECO ENERGY INC has improved earnings per share by 15.8% in the most recent quarter compared to the same quarter a year ago. 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, TECO ENERGY INC reported lower earnings of $0.92 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.92).
- The net income growth from the same quarter one year ago has exceeded that of the Multi-Utilities industry average, but is less than that of the S&P 500. The net income increased by 20.7% when compared to the same quarter one year prior, going from $41.50 million to $50.10 million.
- The gross profit margin for TECO ENERGY INC is currently lower than what is desirable, coming in at 28.94%. Regardless of TE'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 7.32% trails the industry average.
- You can view the full TECO Energy Ratings Report.
- Our dividend calendar.