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." Rayonier (NYSE: RYN) shares currently have a dividend yield of 5.60%. Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company has a P/E ratio of 16.78. The average volume for Rayonier has been 1,148,600 shares per day over the past 30 days. Rayonier has a market cap of $4.4 billion and is part of the materials & construction industry. Shares are down 16.6% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Rayonier as a buy. The company's strengths can be seen in multiple areas, such as its 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:
- Net operating cash flow has increased to $99.27 million or 10.72% when compared to the same quarter last year. Despite an increase in cash flow, RAYONIER INC's cash flow growth rate is still lower than the industry average growth rate of 29.95%.
- RYN, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAYONIER INC's return on equity exceeds that of both the industry average and the S&P 500.
- RAYONIER INC 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, RAYONIER INC increased its bottom line by earning $2.54 versus $2.11 in the prior year. For the next year, the market is expecting a contraction of 48.4% in earnings ($1.31 versus $2.54).
- You can view the full Rayonier Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.5%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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 gross profit margin for TAL INTERNATIONAL GROUP INC is currently very high, coming in at 87.59%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.08% significantly outperformed against the industry average.
- Net operating cash flow has increased to $74.43 million or 11.99% when compared to the same quarter last year. In addition, TAL INTERNATIONAL GROUP INC has also modestly surpassed the industry average cash flow growth rate of 7.06%.
- 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.
- TAL INTERNATIONAL GROUP INC's earnings per share declined by 20.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TAL INTERNATIONAL GROUP INC increased its bottom line by earning $4.25 versus $3.87 in the prior year. For the next year, the market is expecting a contraction of 9.4% in earnings ($3.85 versus $4.25).
- You can view the full TAL International Group Ratings Report.
- T's revenue growth has slightly outpaced the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $8,799.00 million or 7.31% when compared to the same quarter last year. In addition, AT&T INC has also modestly surpassed the industry average cash flow growth rate of 1.65%.
- The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.42 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, AT&T INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full AT&T Ratings Report.
- Our dividend calendar.