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."Windstream Holdings (NASDAQ: WIN) shares currently have a dividend yield of 10.10%. Windstream Holdings, Inc. provides communications and technology solutions in the United States. The company offers managed services and cloud computing services to businesses, as well as broadband, voice, and video services to consumers primarily in rural markets. The company has a P/E ratio of 31.03. The average volume for Windstream Holdings has been 8,948,400 shares per day over the past 30 days. Windstream Holdings has a market cap of $6.0 billion and is part of the telecommunications industry. Shares are up 25.1% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Windstream Holdings as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, notable return on equity, expanding profit margins and increase in stock price during the past year. 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 slightly increased to $319.80 million or 4.99% when compared to the same quarter last year. In addition, WINDSTREAM HOLDINGS INC has also modestly surpassed the industry average cash flow growth rate of 1.50%.
- 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, the net profit margin of 1.09% trails the industry average.
- WIN, with its decline in revenue, slightly underperformed the industry average of 3.4%. 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.
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.8%. Since the same quarter one year prior, revenues rose by 13.1%. 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.
- Net operating cash flow has increased to $128.00 million or 15.41% when compared to the same quarter last year. In addition, REGAL ENTERTAINMENT GROUP has also modestly surpassed the industry average cash flow growth rate of 5.79%.
- REGAL ENTERTAINMENT GROUP 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, REGAL ENTERTAINMENT GROUP increased its bottom line by earning $1.00 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus $1.00).
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- The gross profit margin for REGAL ENTERTAINMENT GROUP is rather low; currently it is at 19.25%. Regardless of RGC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RGC's net profit margin of -0.16% significantly underperformed when compared to the industry average.
- You can view the full Regal Entertainment Group Ratings Report.
- OHI's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 18.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- OMEGA HEALTHCARE INVS INC has improved earnings per share by 32.4% 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, OMEGA HEALTHCARE INVS INC increased its bottom line by earning $1.46 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.46).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 46.5% when compared to the same quarter one year prior, rising from $38.12 million to $55.83 million.
- The gross profit margin for OMEGA HEALTHCARE INVS INC is rather high; currently it is at 68.58%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 46.13% significantly outperformed against the industry average.
- Net operating cash flow has increased to $78.06 million or 35.51% when compared to the same quarter last year. In addition, OMEGA HEALTHCARE INVS INC has also modestly surpassed the industry average cash flow growth rate of 30.47%.
- You can view the full Omega Healthcare Investors Ratings Report.
- Our dividend calendar.