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."Six Flags Entertainment (NYSE: SIX) shares currently have a dividend yield of 4.40%. Six Flags Entertainment Corporation owns and operates regional theme, water, and zoological parks. The company's parks offer various thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets. The company has a P/E ratio of 37.56. The average volume for Six Flags Entertainment has been 641,300 shares per day over the past 30 days. Six Flags Entertainment has a market cap of $4.1 billion and is part of the leisure industry. Shares are up 15.6% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Six Flags Entertainment as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- 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. 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.
- The net income growth from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 2.1% when compared to the same quarter one year prior, going from -$62.53 million to -$61.20 million.
- SIX FLAGS ENTERTAINMENT CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, SIX FLAGS ENTERTAINMENT CORP reported lower earnings of $1.20 versus $3.04 in the prior year. This year, the market expects an improvement in earnings ($1.43 versus $1.20).
- SIX, with its decline in revenue, slightly underperformed the industry average of 6.0%. Since the same quarter one year prior, revenues fell by 15.8%. The declining revenue appears to have seeped down to the company's 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 Hotels, Restaurants & Leisure industry and the overall market, SIX FLAGS ENTERTAINMENT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Six Flags Entertainment Ratings Report.
- TRANSOCEAN LTD has improved earnings per share by 42.7% 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, TRANSOCEAN LTD increased its bottom line by earning $3.87 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.28 versus $3.87).
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.1%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 45.75% is the gross profit margin for TRANSOCEAN LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.49% is above that of the industry average.
- Net operating cash flow has increased to $136.00 million or 28.30% when compared to the same quarter last year. Despite an increase in cash flow, TRANSOCEAN LTD's cash flow growth rate is still lower than the industry average growth rate of 49.49%.
- You can view the full Transocean Ratings Report.
- Powered by its strong earnings growth of 300.00% and other important driving factors, this stock has surged by 33.89% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- NUSTAR ENERGY LP 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 year. We feel that this trend should continue. During the past fiscal year, NUSTAR ENERGY LP continued to lose money by earning -$2.89 versus -$3.05 in the prior year. This year, the market expects an improvement in earnings ($2.02 versus -$2.89).
- 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 61.8% when compared to the same quarter one year prior, rising from $24.57 million to $39.74 million.
- NS, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues fell by 14.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for NUSTAR ENERGY LP is rather low; currently it is at 17.45%. Regardless of NS'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 4.68% trails the industry average.
- You can view the full NuStar Energy L.P Ratings Report.
- Our dividend calendar.