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." Ferrellgas Partners (NYSE: FGP) shares currently have a dividend yield of 7.10%. Ferrellgas Partners, L.P. distributes and sells propane and related equipment and supplies primarily in the United States. It transports propane to propane distribution locations, tanks on customers' premises, or to portable propane tanks delivered to retailers. The company has a P/E ratio of 43.43. The average volume for Ferrellgas Partners has been 180,700 shares per day over the past 30 days. Ferrellgas Partners has a market cap of $2.3 billion and is part of the energy industry. Shares are up 24.3% 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 Ferrellgas Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, growth in earnings per share, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.0%. Since the same quarter one year prior, revenues rose by 19.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has increased to $174.04 million or 40.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 27.52%.
- FERRELLGAS PARTNERS -LP'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, FERRELLGAS PARTNERS -LP turned its bottom line around by earning $0.68 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.68).
- Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 25.34% which was in line with the performance of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Gas Utilities industry average, but is greater than that of the S&P 500. The net income increased by 1.6% when compared to the same quarter one year prior, going from $44.68 million to $45.39 million.
- You can view the full Ferrellgas Partners Ratings Report.