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." BP Dividend Yield: 5.10% BP (NYSE: BP) shares currently have a dividend yield of 5.10%. BP p.l.c. provides fuel for transportation, energy for heat and light, lubricants to engines, and petrochemicals products worldwide. The company has a P/E ratio of 6.21. The average volume for BP has been 5,644,000 shares per day over the past 30 days. BP has a market cap of $140.0 billion and is part of the energy industry. Shares are down 4.9% 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 BP as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels, good cash flow from operations, 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 somewhat disappointing return on equity. Highlights from the ratings report include:
- 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 65.0% when compared to the same quarter one year prior, rising from $2,042.00 million to $3,369.00 million.
- Net operating cash flow has increased to $7,877.00 million or 46.22% when compared to the same quarter last year. In addition, BP PLC has also vastly surpassed the industry average cash flow growth rate of -5.22%.
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
- 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 BP Ratings Report.