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 Dividend Yield: 4.40% 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 13.26. The average volume for Consolidated Edison has been 1,910,800 shares per day over the past 30 days. Consolidated Edison has a market cap of $16.8 billion and is part of the utilities industry. Shares are up 2.1% year-to-date as of the close of trading on Friday. 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, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. 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 ($3.78 versus $3.61).
- You can view the full Consolidated Edison Ratings Report.
- DUKE ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, DUKE ENERGY CORP increased its bottom line by earning $3.73 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($4.60 versus $3.73).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 79.6% when compared to the same quarter one year prior, rising from $339.00 million to $609.00 million.
- 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 1.4%. 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. When compared to other companies in the Electric Utilities industry and the overall market, DUKE ENERGY CORP's return on equity is below that of both the industry average and the S&P 500.
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Duke Energy Corporation Ratings Report.
- The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 22.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 49.66% is the gross profit margin for REALTY INCOME CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.07% is above that of the industry average.
- 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 9.7% when compared to the same quarter one year prior, going from $56.44 million to $61.90 million.
- Net operating cash flow has increased to $184.58 million or 11.75% when compared to the same quarter last year. Despite an increase in cash flow, REALTY INCOME CORP's average is still marginally south of the industry average growth rate of 17.00%.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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 Realty Income Ratings Report.
- Our dividend calendar.