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."Hawaiian Electric Industries Dividend Yield: 4.80% Hawaiian Electric Industries (NYSE: HE) shares currently have a dividend yield of 4.80%. Hawaiian Electric Industries, Inc., through its subsidiaries, is engaged in electric utility and banking businesses primarily in the State of Hawaii. The company is involved in the production, purchase, transmission, distribution, and sale of electricity. The company has a P/E ratio of 14.84. The average volume for Hawaiian Electric Industries has been 857,600 shares per day over the past 30 days. Hawaiian Electric Industries has a market cap of $2.6 billion and is part of the utilities industry. Shares are down 2.6% year-to-date as of the close of trading on Tuesday. 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 Hawaiian Electric Industries as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, largely solid financial position with reasonable debt levels by most measures, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- HAWAIIAN ELECTRIC INDS reported flat earnings per share in the most recent quarter. 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, HAWAIIAN ELECTRIC INDS increased its bottom line by earning $1.62 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $1.62).
- 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 Electric Utilities industry and the overall market on the basis of return on equity, HAWAIIAN ELECTRIC INDS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Even though the current debt-to-equity ratio is 1.08, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Electric Utilities industry average, but is greater than that of the S&P 500. The net income increased by 2.0% when compared to the same quarter one year prior, going from $41.06 million to $41.89 million.
- You can view the full Hawaiian Electric Industries Ratings Report.
- T's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 1.6%. 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 debt-to-equity ratio is somewhat low, currently at 0.91, 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 T's debt-to-equity ratio is low, the quick ratio, which is currently 0.56, displays a potential problem in covering short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, AT&T INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for AT&T INC is rather high; currently it is at 56.37%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, T's net profit margin of 10.88% compares favorably to the industry average.
- You can view the full AT&T Ratings Report.
- The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 14.4%. 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 current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, CVI has a quick ratio of 2.25, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $124.20 million or 47.70% when compared to the same quarter last year. In addition, CVR ENERGY INC has also vastly surpassed the industry average cash flow growth rate of -5.22%.
- 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.
- You can view the full CVR Energy Ratings Report.
- Our dividend calendar.