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." Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.40%. Consolidated Edison, Inc. is engaged in regulated electric, gas, and steam delivery businesses in the United States. The company has a P/E ratio of 13.19. The average volume for Consolidated Edison has been 1,975,900 shares per day over the past 30 days. Consolidated Edison has a market cap of $16.7 billion and is part of the utilities industry. Shares are up 2.8% year-to-date as of the close of trading on Monday. 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 Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, reasonable valuation levels, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Multi-Utilities industry average. The net income increased by 23.8% when compared to the same quarter one year prior, going from $172.00 million to $213.00 million.
- 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 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Multi-Utilities industry and the overall market on the basis of return on equity, CONSOLIDATED EDISON INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- CONSOLIDATED EDISON INC has improved earnings per share by 22.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CONSOLIDATED EDISON INC reported lower earnings of $3.61 versus $3.86 in the prior year. This year, the market expects an improvement in earnings ($3.77 versus $3.61).
- You can view the full Consolidated Edison Ratings Report.
- Net operating cash flow has significantly increased by 93.92% to $74.80 million when compared to the same quarter last year. In addition, BREITBURN ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -6.58%.
- 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. 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.
- BBEP, with its very weak revenue results, has greatly underperformed against the industry average of 2.6%. Since the same quarter one year prior, revenues plummeted by 57.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- BREITBURN ENERGY PARTNERS LP 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 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, BREITBURN ENERGY PARTNERS LP continued to lose money by earning -$0.40 versus -$0.60 in the prior year. For the next year, the market is expecting a contraction of 42.0% in earnings (-$0.57 versus -$0.40).
- BBEP's debt-to-equity ratio of 0.92 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. Despite the fact that BBEP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.50 is low and demonstrates weak liquidity.
- You can view the full BreitBurn Energy Partners Ratings Report.
- WPC's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 125.4%. 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.
- 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 50.0% when compared to the same quarter one year prior, rising from $43.17 million to $64.74 million.
- The gross profit margin for W P CAREY INC is currently very high, coming in at 73.42%. Regardless of WPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 25.59% trails the industry average.
- W P CAREY INC's earnings per share declined by 32.1% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, W P CAREY INC reported lower earnings of $1.17 versus $2.03 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $1.17).
- In its most recent trading session, WPC 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.
- You can view the full W P Carey Ratings Report.
- Our dividend calendar.