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." B&G Foods Dividend Yield: 4.80% B&G Foods (NYSE: BGS) shares currently have a dividend yield of 4.80%. B&G Foods, Inc. manufactures, sells, and distributes shelf-stable food and household products in the United States, Canada, and Puerto Rico. The company has a P/E ratio of 26.20. The average volume for B&G Foods has been 326,400 shares per day over the past 30 days. B&G Foods has a market cap of $1.5 billion and is part of the food & beverage industry. Shares are down 18% 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 B&G Foods as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 26.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 1226.2% when compared to the same quarter one year prior, rising from -$1.43 million to $16.14 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food Products industry and the overall market on the basis of return on equity, B&G FOODS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- B&G FOODS INC 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, B&G FOODS INC reported lower earnings of $0.98 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus $0.98).
- BGS has underperformed the S&P 500 Index, declining 20.48% from its price level of one year ago. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
- You can view the full B&G Foods Ratings Report.
- RRD's revenue growth has slightly outpaced the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 12.9%. 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 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 Commercial Services & Supplies industry and the overall market, DONNELLEY (R R) & SONS CO's return on equity exceeds 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. 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.
- DONNELLEY (R R) & SONS CO's earnings per share declined by 11.1% 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, DONNELLEY (R R) & SONS CO turned its bottom line around by earning $1.15 versus -$3.61 in the prior year. This year, the market expects an improvement in earnings ($1.62 versus $1.15).
- The debt-to-equity ratio is very high at 4.29 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, RRD's quick ratio is somewhat strong at 1.01, demonstrating the ability to handle short-term liquidity needs.
- You can view the full RR Donnelley & Sons Ratings Report.
- 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 2.6% when compared to the same quarter one year prior, going from $213.40 million to $218.89 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.6%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HCP INC'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, HCP INC increased its bottom line by earning $1.98 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.02 versus $1.98).
- The gross profit margin for HCP INC is rather high; currently it is at 59.87%. Regardless of HCP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HCP's net profit margin of 39.73% significantly outperformed against the industry.
- Net operating cash flow has remained constant at $360.52 million with no significant change when compared to the same quarter last year. Despite stable cash flow, HCP INC's cash flow growth rate is still lower than the industry average growth rate of 18.92%.
- You can view the full HCP Ratings Report.
- Our dividend calendar.