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." LaSalle Hotel Properties (NYSE: LHO) shares currently have a dividend yield of 4.20%. LaSalle Hotel Properties, a real estate investment trust (REIT), engages in the purchase, ownership, redevelopment, and leasing of primarily upscale and luxury full-service hotels in convention, resort, and urban business markets in the United States. The company has a P/E ratio of 49.76. The average volume for LaSalle Hotel Properties has been 852,800 shares per day over the past 30 days. LaSalle Hotel Properties has a market cap of $3.7 billion and is part of the real estate industry. Shares are up 15.4% year-to-date as of the close of trading on Monday. TheStreet Ratings rates LaSalle Hotel Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- LHO's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 13.7%. 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.
- Compared to its closing price of one year ago, LHO's share price has jumped by 46.01%, 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, LHO 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 slightly increased to $23.12 million or 3.80% when compared to the same quarter last year. Despite an increase in cash flow, LASALLE HOTEL PROPERTIES's cash flow growth rate is still lower than the industry average growth rate of 29.95%.
- LASALLE HOTEL PROPERTIES's earnings per share declined by 12.5% in the most recent quarter compared to 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, LASALLE HOTEL PROPERTIES increased its bottom line by earning $0.73 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.73).
- You can view the full LaSalle Hotel Properties Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.0%. Since the same quarter one year prior, revenues slightly increased by 3.2%. 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.
- 47.09% is the gross profit margin for ENSCO PLC which we consider to be strong. Regardless of ESV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ESV's net profit margin of 24.64% significantly outperformed against the industry.
- Net operating cash flow has increased to $416.60 million or 21.70% when compared to the same quarter last year. Despite an increase in cash flow, ENSCO PLC's cash flow growth rate is still lower than the industry average growth rate of 49.39%.
- Despite currently having a low debt-to-equity ratio of 0.37, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.00 is weak.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, ENSCO PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Ensco Ratings Report.
- WPC's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 97.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 696.1% when compared to the same quarter one year prior, rising from $14.18 million to $112.89 million.
- Net operating cash flow has significantly increased by 150.04% to $43.70 million when compared to the same quarter last year. In addition, W P CAREY INC has also vastly surpassed the industry average cash flow growth rate of 29.95%.
- The gross profit margin for W P CAREY INC is currently very high, coming in at 74.09%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, WPC's net profit margin of 53.97% significantly outperformed against the industry.
- W P CAREY INC reported significant earnings per share improvement in the most recent quarter compared to 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, W P CAREY INC reported lower earnings of $1.20 versus $2.03 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $1.20).
- You can view the full W P Carey Ratings Report.
- Our dividend calendar.