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." Plains All American Pipeline Dividend Yield: 4.90% Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 4.90%. Plains All American Pipeline, L.P., together with its subsidiaries, is engaged in transporting, storing, terminalling, and marketing crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 23.83. The average volume for Plains All American Pipeline has been 1,063,900 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $20.0 billion and is part of the energy industry. Shares are up 1.3% year-to-date as of the close of trading on Thursday. 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 Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 8.7%. 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.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- PLAINS ALL AMER PIPELNE -LP's earnings per share declined by 21.1% in the most recent quarter compared to 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, PLAINS ALL AMER PIPELNE -LP increased its bottom line by earning $2.80 versus $2.40 in the prior year. For the next year, the market is expecting a contraction of 12.9% in earnings ($2.44 versus $2.80).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, PLAINS ALL AMER PIPELNE -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for PLAINS ALL AMER PIPELNE -LP is currently extremely low, coming in at 4.95%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.56% trails that of the industry average.
- You can view the full Plains All American Pipeline Ratings Report.
- ALTRIA GROUP INC's earnings per share improvement from the most recent quarter was slightly positive. 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, ALTRIA GROUP INC increased its bottom line by earning $2.26 versus $2.06 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $2.26).
- The net income growth from the same quarter one year ago has exceeded that of the Tobacco industry average, but is less than that of the S&P 500. The net income increased by 0.1% when compared to the same quarter one year prior, going from $1,396.00 million to $1,397.00 million.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.17% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The gross profit margin for ALTRIA GROUP INC is rather high; currently it is at 56.15%. Regardless of MO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MO's net profit margin of 29.39% compares favorably to the industry average.
- MO, with its decline in revenue, slightly underperformed the industry average of 0.3%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Altria Group Ratings Report.
- NS's revenue growth has slightly outpaced the industry average of 4.3%. Since the same quarter one year prior, revenues slightly increased by 2.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 60.52% and other important driving factors, this stock has surged by 41.00% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- NUSTAR ENERGY LP 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, NUSTAR ENERGY LP continued to lose money by earning -$2.82 versus -$3.05 in the prior year. This year, the market expects an improvement in earnings ($2.15 versus -$2.82).
- 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 85.5% when compared to the same quarter one year prior, rising from $33.40 million to $61.95 million.
- The gross profit margin for NUSTAR ENERGY LP is rather low; currently it is at 21.23%. Regardless of NS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NS's net profit margin of 7.79% compares favorably to the industry average.
- You can view the full NuStar Energy L.P Ratings Report.
- Our dividend calendar.