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." Windstream Holdings (NASDAQ: WIN) shares currently have a dividend yield of 9.90%. Windstream Holdings, Inc. provides communications and technology solutions in the United States. The company offers managed services and cloud computing services to businesses, as well as broadband, voice, and video services to consumers primarily in rural markets. The company has a P/E ratio of 31.50. The average volume for Windstream Holdings has been 7,574,400 shares per day over the past 30 days. Windstream Holdings has a market cap of $6.1 billion and is part of the telecommunications industry. Shares are up 26.6% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Windstream Holdings as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, notable return on equity, expanding profit margins and solid stock price performance. 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 slightly increased to $319.80 million or 4.99% when compared to the same quarter last year. In addition, WINDSTREAM HOLDINGS INC has also modestly surpassed the industry average cash flow growth rate of 1.70%.
- 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. In comparison to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, WINDSTREAM HOLDINGS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- The gross profit margin for WINDSTREAM HOLDINGS INC is rather high; currently it is at 52.84%. Regardless of WIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.09% trails the industry average.
- WIN, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full Windstream Holdings Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 37.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- This stock has managed to rise its share value by 51.98% over the past twelve months. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ENLK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 50.0% when compared to the same quarter one year prior, rising from $29.40 million to $44.10 million.
- Net operating cash flow has significantly increased by 1174.06% to $121.10 million when compared to the same quarter last year. In addition, ENLINK MIDSTREAM PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of 17.51%.
- ENLINK MIDSTREAM PARTNERS LP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, ENLINK MIDSTREAM PARTNERS LP reported poor results of -$1.56 versus -$1.01 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus -$1.56).
- You can view the full EnLink Midstream Partners 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 -11.16%.
- 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.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, BGS has underperformed the S&P 500 Index, declining 9.00% from its price level of one year ago. 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.
- Our dividend calendar.