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." TAL International Group (NYSE: TAL) shares currently have a dividend yield of 6.40%. TAL International Group, Inc., together with its subsidiaries, leases intermodal transportation equipment and provides maritime container management services worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 11.93. The average volume for TAL International Group has been 297,700 shares per day over the past 30 days. TAL International Group has a market cap of $1.5 billion and is part of the diversified services industry. Shares are down 22.9% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The gross profit margin for TAL INTERNATIONAL GROUP INC is currently very high, coming in at 84.81%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.95% significantly outperformed against the industry average.
- Net operating cash flow has increased to $103.78 million or 36.97% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.07%.
- TAL, with its decline in revenue, slightly underperformed the industry average of 0.2%. Since the same quarter one year prior, revenues slightly dropped by 4.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, TAL 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. 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 22.3% 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 10.6% in earnings ($3.80 versus $4.25).
- You can view the full TAL International Group Ratings Report.
- The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 25.1%. 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.
- LIBERTY PROPERTY TRUST's earnings per share declined by 9.1% 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, LIBERTY PROPERTY TRUST reported lower earnings of $0.62 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.62).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, LPT has underperformed the S&P 500 Index, declining 5.76% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- The gross profit margin for LIBERTY PROPERTY TRUST is currently lower than what is desirable, coming in at 33.97%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 14.80% significantly trails the industry average.
- You can view the full Liberty Property Ratings Report.
- EPR's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 10.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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 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 25.5% when compared to the same quarter one year prior, rising from $32.48 million to $40.76 million.
- The gross profit margin for EPR PROPERTIES is rather high; currently it is at 67.85%. 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 44.27% significantly outperformed against the industry.
- EPR PROPERTIES has improved earnings per share by 18.2% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EPR PROPERTIES increased its bottom line by earning $3.13 versus $2.41 in the prior year. For the next year, the market is expecting a contraction of 8.0% in earnings ($2.88 versus $3.13).
- You can view the full EPR Properties Ratings Report.
- Our dividend calendar.