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." Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.50%. Consolidated Edison, Inc. is engaged in regulated electric, gas, and steam delivery businesses in the United States. The company has a P/E ratio of 13.39. The average volume for Consolidated Edison has been 2,023,300 shares per day over the past 30 days. Consolidated Edison has a market cap of $16.4 billion and is part of the utilities industry. Shares are up 0.8% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, attractive valuation levels, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 14.7%. Since the same quarter one year prior, revenues rose by 19.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 88.0% when compared to the same quarter one year prior, rising from $192.00 million to $361.00 million.
- Net operating cash flow has significantly increased by 366.66% to $224.00 million when compared to the same quarter last year. In addition, CONSOLIDATED EDISON INC has also vastly surpassed the industry average cash flow growth rate of -60.82%.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Multi-Utilities industry and the overall market on the basis of return on equity, CONSOLIDATED EDISON INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Consolidated Edison Ratings Report.
- The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 22.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 243.3% when compared to the same quarter one year prior, rising from -$83.30 million to $119.40 million.
- Net operating cash flow has slightly increased to $210.80 million or 2.37% when compared to the same quarter last year. Despite an increase in cash flow, ENBRIDGE ENERGY PRTNRS -LP's cash flow growth rate is still lower than the industry average growth rate of 18.80%.
- ENBRIDGE ENERGY PRTNRS -LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus -$0.38).
- 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. 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.
- You can view the full Enbridge Energy Partners Ratings Report.
- 35.84% is the gross profit margin for PPL CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 7.96% is above that of the industry average.
- PPL CORP's earnings per share declined by 46.0% 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, PPL CORP reported lower earnings of $1.74 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($2.23 versus $1.74).
- PPL, with its decline in revenue, underperformed when compared the industry average of 5.7%. Since the same quarter one year prior, revenues fell by 17.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, PPL 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. 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.
- Net operating cash flow has declined marginally to $652.00 million or 7.25% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full PPL Ratings Report.
- Our dividend calendar.