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." LaSalle Hotel Properties (NYSE: LHO) shares currently have a dividend yield of 4.20%. LaSalle Hotel Properties, a real estate investment trust (REIT), engages in the purchase, ownership, redevelopment, and leasing of primarily upscale and luxury full-service hotels in convention, resort, and urban business markets in the United States. The company has a P/E ratio of 30.47. The average volume for LaSalle Hotel Properties has been 927,400 shares per day over the past 30 days. LaSalle Hotel Properties has a market cap of $3.7 billion and is part of the real estate industry. Shares are up 15.5% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates LaSalle Hotel Properties as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- LHO's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 17.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 121.62% and other important driving factors, this stock has surged by 29.13% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LHO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- LASALLE HOTEL PROPERTIES reported significant earnings per share improvement 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, LASALLE HOTEL PROPERTIES increased its bottom line by earning $0.73 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus $0.73).
- 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 121.9% when compared to the same quarter one year prior, rising from $40.86 million to $90.69 million.
- You can view the full LaSalle Hotel Properties Ratings Report.
- TEG's very impressive revenue growth greatly exceeded the industry average of 14.7%. Since the same quarter one year prior, revenues leaped by 74.3%. 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.
- TEG's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
- In its most recent trading session, TEG 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.
- INTEGRYS ENERGY GROUP INC's earnings per share declined by 17.5% 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, INTEGRYS ENERGY GROUP INC increased its bottom line by earning $4.34 versus $3.68 in the prior year. For the next year, the market is expecting a contraction of 18.2% in earnings ($3.55 versus $4.34).
- You can view the full Integrys Energy Group Ratings Report.
- The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 20.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The gross profit margin for MAIN STREET CAPITAL CORP is currently very high, coming in at 84.56%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 88.49% significantly outperformed against the industry average.
- Net operating cash flow has increased to -$16.73 million or 31.13% when compared to the same quarter last year. In addition, MAIN STREET CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -96.54%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 15.3% when compared to the same quarter one year prior, going from $23.63 million to $27.23 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, MAIN STREET CAPITAL CORP 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 Main Street Capital Corporation Ratings Report.
- Our dividend calendar.