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." Public Service Enterprise Group (NYSE: PEG) shares currently have a dividend yield of 4.20%. Public Service Enterprise Group Incorporated, through its subsidiaries, operates as an energy company primarily in the Northeastern and Mid Atlantic United States. The company has a P/E ratio of 15.18. The average volume for Public Service Enterprise Group has been 3,460,800 shares per day over the past 30 days. Public Service Enterprise Group has a market cap of $18.0 billion and is part of the utilities industry. Shares are up 10.6% 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 Public Service Enterprise Group as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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 debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that PEG's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
- PUBLIC SERVICE ENTRP GRP INC's earnings per share declined by 36.4% 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, PUBLIC SERVICE ENTRP GRP INC reported lower earnings of $2.45 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($2.73 versus $2.45).
- PEG, with its decline in revenue, slightly underperformed the industry average of 7.2%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Public Service Enterprise Group Ratings Report.
- DLR's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 10.7%. 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.
- 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 3.2% when compared to the same quarter one year prior, going from $58.48 million to $60.34 million.
- 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, despite 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.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DIGITAL REALTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Digital Realty Ratings Report.
- ENLK's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 104.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 178.26% and other important driving factors, this stock has surged by 57.76% 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, ENLK should continue to move higher despite the fact that it has already enjoyed a very nice gain 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 370.9% when compared to the same quarter one year prior, rising from -$10.63 million to $28.80 million.
- ENLINK MIDSTREAM PARTNERS LP reported significant earnings per share improvement 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, ENLINK MIDSTREAM PARTNERS LP reported poor results of -$1.56 versus -$1.01 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus -$1.56).
- The gross profit margin for ENLINK MIDSTREAM PARTNERS LP is rather low; currently it is at 20.78%. Regardless of ENLK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.10% trails the industry average.
- You can view the full EnLink Midstream Partners Ratings Report.
- Our dividend calendar.