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."Energy Transfer Partners (NYSE: ETP) shares currently have a dividend yield of 6.60%. Energy Transfer Partners, L.P. is engaged in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The average volume for Energy Transfer Partners has been 1,112,500 shares per day over the past 30 days. Energy Transfer Partners has a market cap of $18.2 billion and is part of the energy industry. Shares are down 1.8% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Energy Transfer Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in net income, increase in stock price during the past year and growth in earnings per share. 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:
- The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 12.7%. 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 significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 28.9% when compared to the same quarter one year prior, rising from $322.00 million to $415.00 million.
- Net operating cash flow has significantly increased by 93.20% to $682.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of 17.65%.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- ENERGY TRANSFER PARTNERS -LP has improved earnings per share by 15.0% 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, ENERGY TRANSFER PARTNERS -LP swung to a loss, reporting -$0.24 versus $5.76 in the prior year. This year, the market expects an improvement in earnings ($2.80 versus -$0.24).
- You can view the full Energy Transfer Partners Ratings Report.
- Compared to its closing price of one year ago, RDS.B's share price has jumped by 33.09%, 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 17.65%.
- 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 2.3% when compared to the same quarter one year prior, going from $344.00 million to $352.00 million.
- 39.93% is the gross profit margin for WILLIAMS PARTNERS LP which we consider to be strong. Regardless of WPZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WPZ's net profit margin of 20.79% significantly outperformed against the industry.
- Net operating cash flow has slightly increased to $549.00 million or 7.43% when compared to the same quarter last year. Despite an increase in cash flow, WILLIAMS PARTNERS LP's cash flow growth rate is still lower than the industry average growth rate of 17.65%.
- WILLIAMS PARTNERS LP's earnings per share declined by 28.0% 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, WILLIAMS PARTNERS LP reported lower earnings of $1.45 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($1.93 versus $1.45).
- WPZ, with its decline in revenue, slightly underperformed the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Williams Partners Ratings Report.
- Our dividend calendar.