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." SouFun Holdings Dividend Yield: 19.80% SouFun Holdings (NYSE: SFUN) shares currently have a dividend yield of 19.80%. SouFun Holdings Limited operates a real estate Internet portal, and a home furnishing and an improvement Website in the People's Republic of China. The company has a P/E ratio of 13.65. The average volume for SouFun Holdings has been 7,226,200 shares per day over the past 30 days. SouFun Holdings has a market cap of $4.1 billion and is part of the internet industry. Shares are down 41.3% year-to-date as of the close of trading on Thursday. 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 SouFun Holdings as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, robust revenue growth, expanding profit margins, growth in earnings per share 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 net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Internet Software & Services industry average. The net income increased by 23.2% when compared to the same quarter one year prior, going from $55.37 million to $68.20 million.
- SFUN's revenue growth trails the industry average of 43.9%. Since the same quarter one year prior, revenues rose by 16.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for SOUFUN HLDGS LTD is currently very high, coming in at 84.28%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 40.55% significantly outperformed against the industry average.
- SOUFUN HLDGS LTD has improved earnings per share by 11.9% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, SOUFUN HLDGS LTD increased its bottom line by earning $0.71 versus $0.37 in the prior year. For the next year, the market is expecting a contraction of 8.2% in earnings ($0.65 versus $0.71).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, SOUFUN HLDGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full SouFun Holdings Ratings Report.