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."National Retail Properties (NYSE: NNN) shares currently have a dividend yield of 4.50%. National Retail Properties, Inc. is a publicly owned equity real estate investment trust. The firm acquires, owns, manages, and develops retail properties in the United States. The company has a P/E ratio of 34.23. The average volume for National Retail Properties has been 1,103,000 shares per day over the past 30 days. National Retail Properties has a market cap of $4.6 billion and is part of the real estate industry. Shares are up 24.3% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates National Retail Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, growth in earnings per share, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- NNN's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 12.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NATIONAL RETAIL PROPERTIES has improved earnings per share by 12.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NATIONAL RETAIL PROPERTIES increased its bottom line by earning $1.06 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($1.11 versus $1.06).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 27.2% when compared to the same quarter one year prior, rising from $34.07 million to $43.33 million.
- The gross profit margin for NATIONAL RETAIL PROPERTIES is rather high; currently it is at 59.84%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 41.61% significantly outperformed against the industry average.
- Net operating cash flow has increased to $78.60 million or 14.21% when compared to the same quarter last year. Despite an increase in cash flow, NATIONAL RETAIL PROPERTIES's cash flow growth rate is still lower than the industry average growth rate of 29.73%.
- You can view the full National Retail Properties Ratings Report.
- Net operating cash flow has significantly increased by 107.48% to $8,231.00 million when compared to the same quarter last year. In addition, BP PLC has also vastly surpassed the industry average cash flow growth rate of 17.02%.
- 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. 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 current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 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 3.4%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full BP Ratings Report.
- AMERIGAS PARTNERS -LP has improved earnings per share by 9.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AMERIGAS PARTNERS -LP turned its bottom line around by earning $1.43 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($2.92 versus $1.43).
- Despite its growing revenue, the company underperformed as compared with the industry average of 36.0%. Since the same quarter one year prior, revenues rose by 27.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Gas Utilities industry and the overall market, AMERIGAS PARTNERS -LP's return on equity 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, but is less than that of the Gas Utilities industry average. The net income increased by 12.6% when compared to the same quarter one year prior, going from $213.21 million to $240.10 million.
- 40.64% is the gross profit margin for AMERIGAS PARTNERS -LP which we consider to be strong. Regardless of APU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, APU's net profit margin of 16.07% compares favorably to the industry average.
- You can view the full AmeriGas Partners Ratings Report.
- Our dividend calendar.