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 30.33. The average volume for LaSalle Hotel Properties has been 922,600 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 14.2% year-to-date as of the close of trading on Friday. 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 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 10.1%. 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 29.52% 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 ($1.36 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.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 2.6% when compared to the same quarter one year prior, going from $213.40 million to $218.89 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HCP INC's earnings per share improvement from the most recent quarter was slightly positive. 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, HCP INC increased its bottom line by earning $1.98 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.98).
- The gross profit margin for HCP INC is rather high; currently it is at 59.87%. Regardless of HCP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HCP's net profit margin of 39.73% significantly outperformed against the industry.
- Net operating cash flow has remained constant at $360.52 million with no significant change when compared to the same quarter last year. This quarter, HCP INC's cash flow growth rate has remained relatively unchanged and is slightly below the industry average.
- You can view the full HCP Ratings Report.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- 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 65.0% when compared to the same quarter one year prior, rising from $2,042.00 million to $3,369.00 million.
- Net operating cash flow has increased to $7,877.00 million or 46.22% when compared to the same quarter last year. In addition, BP PLC has also vastly surpassed the industry average cash flow growth rate of -6.58%.
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
- You can view the full BP Ratings Report.
- Our dividend calendar.