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."Home Properties Dividend Yield: 4.80% Home Properties (NYSE: HME) shares currently have a dividend yield of 4.80%. Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 36.67. The average volume for Home Properties has been 315,500 shares per day over the past 30 days. Home Properties has a market cap of $3.5 billion and is part of the real estate industry. Shares are up 13.6% 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 Home Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.4%. Since the same quarter one year prior, revenues slightly increased by 3.7%. 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.
- Net operating cash flow has slightly increased to $81.51 million or 8.71% when compared to the same quarter last year. Despite an increase in cash flow, HOME PROPERTIES INC's average is still marginally south of the industry average growth rate of 18.38%.
- HOME PROPERTIES INC's earnings per share declined by 7.1% 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, HOME PROPERTIES INC increased its bottom line by earning $1.65 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.65).
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HOME PROPERTIES INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Home Properties Ratings Report.
- MACQUARIE INFRASTRUCT CO LLC 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 year. We feel that this trend should continue. During the past fiscal year, MACQUARIE INFRASTRUCT CO LLC increased its bottom line by earning $0.60 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($1.31 versus $0.60).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Transportation Infrastructure industry. The net income increased by 1243.9% when compared to the same quarter one year prior, rising from -$0.85 million to $9.70 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.6%. Since the same quarter one year prior, revenues rose by 11.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has significantly increased by 66.38% to $72.26 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 52.69%.
- 41.49% is the gross profit margin for MACQUARIE INFRASTRUCT CO LLC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MIC's net profit margin of 3.45% significantly trails the industry average.
- You can view the full Macquarie Infrastructure Ratings Report.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- TECO ENERGY INC has improved earnings per share by 12.5% 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, TECO ENERGY INC reported lower earnings of $0.92 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.92).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Multi-Utilities industry average. The net income increased by 13.6% when compared to the same quarter one year prior, going from $51.40 million to $58.40 million.
- TE, with its decline in revenue, slightly underperformed the industry average of 6.9%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for TECO ENERGY INC is currently lower than what is desirable, coming in at 29.93%. Regardless of TE'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 8.04% trails the industry average.
- You can view the full TECO Energy Ratings Report.
- Our dividend calendar.