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." Hospitality Properties (NYSE: HPT) shares currently have a dividend yield of 6.40%. Hospitality Properties Trust, a real estate investment trust (REIT), engages in buying, owning, and leasing hotels. The company has a P/E ratio of 38.00. The average volume for Hospitality Properties has been 763,800 shares per day over the past 30 days. Hospitality Properties has a market cap of $4.6 billion and is part of the real estate industry. Shares are up 13.2% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Hospitality Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- HPT's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 11.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 36.5% when compared to the same quarter one year prior, rising from $27.51 million to $37.55 million.
- Net operating cash flow has significantly increased by 74.92% to $79.07 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 30.73%.
- 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 Hospitality Properties Ratings Report.
- The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 15.7%. 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 $31.00 million or 34.17% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -9.83%.
- B&G FOODS INC's earnings per share declined by 10.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, B&G FOODS INC reported lower earnings of $0.98 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $0.98).
- The gross profit margin for B&G FOODS INC is currently lower than what is desirable, coming in at 34.48%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 8.97% is above that of the industry average.
- In its most recent trading session, BGS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
- You can view the full B&G Foods Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.6%. 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 5.61%.
- 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.
- Our dividend calendar.