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."Entergy Dividend Yield: 4.30% Entergy (NYSE: ETR) shares currently have a dividend yield of 4.30%. Entergy Corporation, together with its subsidiaries, is engaged in the electric power production and retail electric distribution operations in the United States. It generates electricity through gas/oil, nuclear, coal, and hydro power. The company has a P/E ratio of 14.25. The average volume for Entergy has been 1,472,700 shares per day over the past 30 days. Entergy has a market cap of $14.0 billion and is part of the utilities industry. Shares are up 25.8% year-to-date as of the close of trading on Wednesday. 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 Entergy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, growth in earnings per share and increase in net income. 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:
- ETR's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 9.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
- Net operating cash flow has increased to $761.41 million or 33.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.95%.
- ENTERGY CORP has improved earnings per share by 14.1% 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, ENTERGY CORP reported lower earnings of $3.98 versus $4.75 in the prior year. This year, the market expects an improvement in earnings ($6.15 versus $3.98).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Electric Utilities industry average, but is greater than that of the S&P 500. The net income increased by 15.6% when compared to the same quarter one year prior, going from $168.06 million to $194.28 million.
- You can view the full Entergy Ratings Report.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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 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 13.7% when compared to the same quarter one year prior, going from $34.21 million to $38.90 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.5%. Since the same quarter one year prior, revenues slightly increased by 8.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has increased to $68.99 million or 23.47% when compared to the same quarter last year. In addition, GEO GROUP INC has also modestly surpassed the industry average cash flow growth rate of 18.37%.
- You can view the full GEO Group Ratings Report.
- The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MAT has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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. In comparison to other companies in the Leisure Equipment & Products industry and the overall market on the basis of return on equity, MATTEL INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- Net operating cash flow has increased to -$139.74 million or 37.46% when compared to the same quarter last year. Despite an increase in cash flow of 37.46%, MATTEL INC is still growing at a significantly lower rate than the industry average of 195.22%.
- The gross profit margin for MATTEL INC is rather high; currently it is at 51.04%. Regardless of MAT'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 2.66% trails the industry average.
- MAT, with its decline in revenue, underperformed when compared the industry average of 6.8%. Since the same quarter one year prior, revenues slightly dropped by 9.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Mattel Ratings Report.
- Our dividend calendar.