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 8.00%. 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 12.30. The average volume for Starwood Property has been 2,231,400 shares per day over the past 30 days. Starwood Property has a market cap of $5.3 billion and is part of the real estate industry. Shares are down 12.4% year-to-date as of the close of trading on Friday. 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.
- NNN's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 12.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NATIONAL RETAIL PROPERTIES has improved earnings per share by 12.0% 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, NATIONAL RETAIL PROPERTIES increased its bottom line by earning $1.06 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($1.11 versus $1.06).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 27.2% when compared to the same quarter one year prior, rising from $34.07 million to $43.33 million.
- The gross profit margin for NATIONAL RETAIL PROPERTIES is rather high; currently it is at 59.84%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 41.61% significantly outperformed against the industry average.
- Net operating cash flow has increased to $78.60 million or 14.21% when compared to the same quarter last year. Despite an increase in cash flow, NATIONAL RETAIL PROPERTIES's cash flow growth rate is still lower than the industry average growth rate of 30.28%.
- You can view the full National Retail Properties Ratings Report.
- 38.21% is the gross profit margin for ROGERS COMMUNICATIONS which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RCI's net profit margin of 10.16% significantly trails the industry average.
- RCI, with its decline in revenue, slightly underperformed the industry average of 2.5%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, ROGERS COMMUNICATIONS's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $408.00 million or 49.31% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 3.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, RCI maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
- You can view the full Rogers Communications Ratings Report.
- Our dividend calendar.