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." Dupont Fabros Technology Dividend Yield: 4.50% Dupont Fabros Technology (NYSE: DFT) shares currently have a dividend yield of 4.50%. DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 28.51. The average volume for Dupont Fabros Technology has been 593,200 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $2.0 billion and is part of the real estate industry. Shares are up 24.9% year-to-date as of the close of trading on Tuesday. 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 Dupont Fabros Technology as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, expanding profit margins and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- DFT's revenue growth has slightly outpaced the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 9.6%. Growth in the company's revenue appears to have helped boost the 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. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- 39.28% is the gross profit margin for DUPONT FABROS TECHNOLOGY INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.40% is above that of the industry average.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 854.2% when compared to the same quarter one year prior, rising from -$3.42 million to $25.77 million.
- You can view the full Dupont Fabros Technology Ratings Report.
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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.
- The debt-to-equity ratio is somewhat low, currently at 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- Net operating cash flow has significantly increased by 119.79% to $17.98 million when compared to the same quarter last year. In addition, MDC HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of -31.38%.
- MDC HOLDINGS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MDC HOLDINGS INC increased its bottom line by earning $6.36 versus $1.26 in the prior year. For the next year, the market is expecting a contraction of 73.5% in earnings ($1.69 versus $6.36).
- You can view the full M D C Holdings Ratings Report.
- 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 11.0% when compared to the same quarter one year prior, going from $51.84 million to $57.55 million.
- CORRECTIONS CORP AMER has improved earnings per share by 8.9% 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, CORRECTIONS CORP AMER increased its bottom line by earning $2.86 versus $1.56 in the prior year. For the next year, the market is expecting a contraction of 34.5% in earnings ($1.87 versus $2.86).
- CXW, with its decline in revenue, underperformed when compared the industry average of 8.9%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, CORRECTIONS CORP AMER has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Corrections Corp of America Ratings Report.
- Our dividend calendar.