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."El Paso Pipeline Partners (NYSE: EPB) shares currently have a dividend yield of 6.10%. El Paso Pipeline Partners, L.P. owns and operates interstate natural gas transportation and terminaling facilities in the United States. The company has a P/E ratio of 24.43. The average volume for El Paso Pipeline Partners has been 1,309,300 shares per day over the past 30 days. El Paso Pipeline Partners has a market cap of $9.8 billion and is part of the energy industry. Shares are up 18.3% 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 El Paso Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- Net operating cash flow has slightly increased to $171.00 million or 4.26% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.58%.
- The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 76.77%. Regardless of EPB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPB's net profit margin of 37.11% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- In its most recent trading session, EPB 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. 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.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, EL PASO PIPELINE PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full El Paso Pipeline Partners 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 Multi-Utilities industry. The net income increased by 56.8% when compared to the same quarter one year prior, rising from $95.00 million to $149.00 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 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has slightly increased to $415.00 million or 6.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.08%.
- You can view the full Ameren Ratings Report.
- 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. Although other factors naturally played a role, the company's strong earnings growth was key. 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 205.5% when compared to the same quarter one year prior, rising from $1,737.00 million to $5,307.00 million.
- RDS.B's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
- ROYAL DUTCH SHELL PLC 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, ROYAL DUTCH SHELL PLC reported lower earnings of $5.18 versus $8.52 in the prior year. This year, the market expects an improvement in earnings ($15.30 versus $5.18).
- You can view the full Royal Dutch Shell Ratings Report.
- Our dividend calendar.