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."Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.50%. Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 29.41. The average volume for Medical Properties has been 1,183,200 shares per day over the past 30 days. Medical Properties has a market cap of $2.2 billion and is part of the real estate industry. Shares are up 8.9% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Medical Properties as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 26.2%. 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.
- MEDICAL PROPERTIES TRUST 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 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, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.59 versus $0.54 in the prior year.
- 39.44% is the gross profit margin for MEDICAL PROPERTIES TRUST which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MPW's net profit margin of 9.87% is significantly lower than the industry average.
- The share price of MEDICAL PROPERTIES TRUST has not done very well: it is down 12.10% 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.
- Net operating cash flow has decreased to $18.28 million or 32.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Medical Properties 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 20.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The gross profit margin for MAIN STREET CAPITAL CORP is currently very high, coming in at 84.56%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 88.49% significantly outperformed against the industry average.
- Net operating cash flow has increased to -$16.73 million or 31.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.42%.
- 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 15.3% when compared to the same quarter one year prior, going from $23.63 million to $27.23 million.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- You can view the full Main Street Capital Corporation Ratings Report.
- Compared to its closing price of one year ago, RDS.B's share price has jumped by 28.41%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RDS.B should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has increased to $13,984.00 million or 20.97% when compared to the same quarter last year. In addition, ROYAL DUTCH SHELL PLC has also modestly surpassed the industry average cash flow growth rate of 17.51%.
- RDS.B's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Royal Dutch Shell Ratings Report.
- Our dividend calendar.