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." Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.30%. Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 22.07. The average volume for Medical Properties has been 1,205,600 shares per day over the past 30 days. Medical Properties has a market cap of $2.3 billion and is part of the real estate industry. Shares are up 8.3% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Medical Properties as a buy. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. 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 revenue growth came in higher than the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 30.5%. 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.
- MEDICAL PROPERTIES TRUST has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.59 versus $0.54 in the prior year.
- The share price of MEDICAL PROPERTIES TRUST has not done very well: it is down 5.97% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 100.7% when compared to the same quarter one year ago, falling from $27.35 million to -$0.20 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, MEDICAL PROPERTIES TRUST underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Medical Properties Ratings Report.
- RLJ's revenue growth has slightly outpaced the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 13.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
- RLJ LODGING TRUST has improved earnings per share by 35.5% 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, RLJ LODGING TRUST increased its bottom line by earning $0.87 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $0.87).
- 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 30.6% when compared to the same quarter one year prior, rising from $40.51 million to $52.90 million.
- You can view the full RLJ Lodging Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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.
- PG&E CORP's earnings per share declined by 23.0% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PG&E CORP reported lower earnings of $1.84 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($3.03 versus $1.84).
- Net operating cash flow has decreased to $509.00 million or 13.72% when compared to the same quarter last year. Despite a decrease in cash flow PG&E CORP is still fairing well by exceeding its industry average cash flow growth rate of -23.77%.
- Even though the current debt-to-equity ratio is 1.01, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Despite the fact that PCG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.52 is low and demonstrates weak liquidity.
- 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. When compared to other companies in the Multi-Utilities industry and the overall market, PG&E CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full PG&E Ratings Report.
- Our dividend calendar.