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 4.60%. 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 31.97. The average volume for National Retail Properties has been 1,164,100 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 22% year-to-date as of the close of trading on Wednesday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreet Ratings rates National Retail Properties as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, compelling growth in net income, revenue growth, expanding profit margins and increase in stock price during the past year. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- NATIONAL RETAIL PROPERTIES has improved earnings per share by 15.4% 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 ($1.12 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 21.6% when compared to the same quarter one year prior, going from $37.49 million to $45.57 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 9.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for NATIONAL RETAIL PROPERTIES is rather high; currently it is at 61.22%. Regardless of NNN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NNN's net profit margin of 43.11% significantly outperformed against the industry.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- You can view the full National Retail Properties Ratings Report.
- PCL's revenue growth has slightly outpaced the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 17.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 19.6% when compared to the same quarter one year prior, going from $46.00 million to $55.00 million.
- 40.17% is the gross profit margin for PLUM CREEK TIMBER CO INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PCL's net profit margin of 15.44% significantly trails the industry average.
- PLUM CREEK TIMBER CO INC has improved earnings per share by 10.7% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PLUM CREEK TIMBER CO INC increased its bottom line by earning $1.31 versus $1.25 in the prior year. For the next year, the market is expecting a contraction of 11.8% in earnings ($1.16 versus $1.31).
- PCL has underperformed the S&P 500 Index, declining 14.13% 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.
- You can view the full Plum Creek Timber Ratings Report.
- GEL, with its decline in revenue, underperformed when compared the industry average of 2.1%. Since the same quarter one year prior, revenues fell by 16.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- GENESIS ENERGY -LP's earnings per share declined by 27.3% 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, GENESIS ENERGY -LP reported lower earnings of $1.00 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.46 versus $1.00).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- 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 Oil, Gas & Consumable Fuels industry. The net income has decreased by 21.4% when compared to the same quarter one year ago, dropping from $26.90 million to $21.15 million.
- The debt-to-equity ratio of 1.47 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, GEL maintains a poor quick ratio of 0.88, which illustrates the inability to avoid short-term cash problems.
- You can view the full Genesis Energy Ratings Report.
- Our dividend calendar.