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."Liberty Property (NYSE: LPT) shares currently have a dividend yield of 5.10%. Liberty Property Trust is a publicly owned real estate investment holding trust. Through its subsidiary, it provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties. The company has a P/E ratio of 55.16. The average volume for Liberty Property has been 715,900 shares per day over the past 30 days. Liberty Property has a market cap of $5.5 billion and is part of the real estate industry. Shares are up 10.8% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Liberty Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 34.9%. 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.
- The net income growth from the same quarter one year ago has 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 0.9% when compared to the same quarter one year prior, going from $71.24 million to $71.90 million.
- LIBERTY PROPERTY TRUST's earnings per share declined by 10.5% 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, LIBERTY PROPERTY TRUST reported lower earnings of $0.67 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.67).
- In its most recent trading session, LPT 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. 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 gross profit margin for LIBERTY PROPERTY TRUST is currently lower than what is desirable, coming in at 32.38%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 35.19% has significantly outperformed against the industry average.
- You can view the full Liberty Property Ratings Report.
- Compared to its closing price of one year ago, SNP's share price has jumped by 40.47%, 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, SNP 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 significantly increased by 55.46% to $2,030.28 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.65%.
- The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.22 is very weak and demonstrates a lack of ability to pay short-term obligations.
- CHINA PETROLEUM & CHEM CORP's earnings per share declined by 17.2% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CHINA PETROLEUM & CHEM CORP reported lower earnings of $8.47 versus $8.73 in the prior year. This year, the market expects an improvement in earnings ($10.56 versus $8.47).
- You can view the full China Petroleum & Chemical Ratings Report.
- DUK's revenue growth has slightly outpaced the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 12.6%. 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 $1,373.00 million or 25.84% when compared to the same quarter last year. In addition, DUKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 18.43%.
- DUKE ENERGY CORP 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, DUKE ENERGY CORP increased its bottom line by earning $3.73 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($4.58 versus $3.73).
- 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. 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 DUKE ENERGY CORP is currently lower than what is desirable, coming in at 34.48%. Regardless of DUK'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 -1.46% trails the industry average.
- You can view the full Duke Energy Corporation Ratings Report.
- Our dividend calendar.