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." CenturyLink Dividend Yield: 5.40% CenturyLink (NYSE: CTL) shares currently have a dividend yield of 5.40%. CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The company operates through four segments: Consumer, Business, Wholesale, and Data Hosting. The average volume for CenturyLink has been 4,390,100 shares per day over the past 30 days. CenturyLink has a market cap of $23.0 billion and is part of the telecommunications industry. Shares are up 26.8% year-to-date as of the close of trading on Monday. 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 CenturyLink as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- CTL's revenue growth has slightly outpaced the industry average of 1.6%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
- The gross profit margin for CENTURYLINK INC is rather high; currently it is at 56.93%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.25% trails the industry average.
- CENTURYLINK INC's earnings per share declined by 22.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CENTURYLINK INC swung to a loss, reporting -$0.43 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($2.63 versus -$0.43).
- Even though the current debt-to-equity ratio is 1.26, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.49 is very low and demonstrates very weak liquidity.
- You can view the full CenturyLink Ratings Report.
- Net operating cash flow has significantly increased by 60.96% to $200.82 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 26.47%.
- The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.38 is very weak and demonstrates a lack of ability to pay short-term obligations.
- WGL HOLDINGS INC's earnings per share declined by 21.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, WGL HOLDINGS INC reported lower earnings of $1.55 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($2.55 versus $1.55).
- WGL, with its decline in revenue, underperformed when compared the industry average of 9.0%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for WGL HOLDINGS INC is currently extremely low, coming in at 4.29%. Regardless of WGL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.48% trails the industry average.
- You can view the full WGL Holdings Ratings Report.
- MCC's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 61.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MEDLEY CAPITAL 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 two years. We feel that this trend should continue. During the past fiscal year, MEDLEY CAPITAL CORP increased its bottom line by earning $1.32 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.59 versus $1.32).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 425.5% when compared to the same quarter one year prior, rising from $3.16 million to $16.59 million.
- The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 68.40%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.57% significantly outperformed against the industry average.
- Net operating cash flow has increased to -$64.69 million or 41.32% when compared to the same quarter last year. In addition, MEDLEY CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -89.21%.
- You can view the full Medley Capital Ratings Report.
- Our dividend calendar.