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.