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." BP Prudhoe Bay Royalty (NYSE: BPT) shares currently have a dividend yield of 12.90%. BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interest comprising a non-operational interest in minerals in the Prudhoe Bay field located on the North Slope of Alaska. The company has a P/E ratio of 35.57. The average volume for BP Prudhoe Bay Royalty has been 135,200 shares per day over the past 30 days. BP Prudhoe Bay Royalty has a market cap of $2.0 billion and is part of the energy industry. Shares are up 18.4% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates BP Prudhoe Bay Royalty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. 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 slightly increased by 9.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, BPT has a quick ratio of 2.11, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, BP PRUDHOE BAY ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 9.2% when compared to the same quarter one year prior, going from $49.55 million to $54.10 million.
- The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.76% significantly outperformed against the industry.
- You can view the full BP Prudhoe Bay Royalty Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.6% when compared to the same quarter one year prior, going from $41.21 million to $43.53 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 8.2%. 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.
- The gross profit margin for EPR PROPERTIES is rather high; currently it is at 67.25%. Regardless of EPR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPR's net profit margin of 48.27% significantly outperformed against the industry.
- Net operating cash flow has slightly increased to $41.53 million or 3.38% when compared to the same quarter last year. Despite an increase in cash flow, EPR PROPERTIES's cash flow growth rate is still lower than the industry average growth rate of 29.86%.
- 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.
- You can view the full EPR Properties Ratings Report.
- 38.21% is the gross profit margin for ROGERS COMMUNICATIONS which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RCI's net profit margin of 10.16% significantly trails the industry average.
- RCI, with its decline in revenue, slightly underperformed the industry average of 2.5%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, ROGERS COMMUNICATIONS's return on equity significantly exceeds that of both the industry average and the S&P 500.
- In its most recent trading session, RCI 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. 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.
- ROGERS COMMUNICATIONS's earnings per share declined by 16.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, ROGERS COMMUNICATIONS reported lower earnings of $3.13 versus $3.30 in the prior year.
- You can view the full Rogers Communications Ratings Report.
- Our dividend calendar.