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." Tesoro Logistics Dividend Yield: 4.50% Tesoro Logistics (NYSE: TLLP) shares currently have a dividend yield of 4.50%. Tesoro Logistics LP owns, operates, develops, and acquires logistics assets related to crude oil and refined products in the United States. It operates in two segments, Crude Oil Gathering, and Terminalling and Transportation. The company has a P/E ratio of 30.78. The average volume for Tesoro Logistics has been 549,600 shares per day over the past 30 days. Tesoro Logistics has a market cap of $3.1 billion and is part of the energy industry. Shares are up 7.6% year-to-date as of the close of trading on Friday. 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 Tesoro Logistics as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and compelling growth 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:
- TLLP's very impressive revenue growth greatly exceeded the industry average of 1.9%. Since the same quarter one year prior, revenues leaped by 116.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TESORO LOGISTICS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for TESORO LOGISTICS LP is rather high; currently it is at 60.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.14% significantly outperformed against the industry average.
- Net operating cash flow has increased to $18.54 million or 19.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.46%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 142.2% when compared to the same quarter one year prior, rising from $13.53 million to $32.77 million.
- You can view the full Tesoro Logistics Ratings Report.