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.