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."RR Donnelley & Sons Dividend Yield: 6.00% RR Donnelley & Sons (NASDAQ: RRD) shares currently have a dividend yield of 6.00%. R.R. Donnelley & Sons Company provides integrated communication solutions to private and public sectors worldwide. It operates through Publishing and Retail Services, Variable Print, Strategic Services, and International segments. The company has a P/E ratio of 16.39. The average volume for RR Donnelley & Sons has been 1,669,800 shares per day over the past 30 days. RR Donnelley & Sons has a market cap of $3.5 billion and is part of the diversified services industry. Shares are down 15.4% 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 RR Donnelley & Sons as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, impressive record of earnings per share growth 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:
- RRD's revenue growth has slightly outpaced the industry average of 9.2%. Since the same quarter one year prior, revenues rose by 13.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DONNELLEY (R R) & SONS CO 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, DONNELLEY (R R) & SONS CO turned its bottom line around by earning $1.15 versus -$3.61 in the prior year. This year, the market expects an improvement in earnings ($1.61 versus $1.15).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 323.1% when compared to the same quarter one year prior, rising from $14.70 million to $62.20 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Commercial Services & Supplies industry and the overall market, DONNELLEY (R R) & SONS CO's return on equity exceeds that of both the industry average and the S&P 500.
- In its most recent trading session, RRD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full RR Donnelley & Sons Ratings Report.
- GOV's revenue growth has slightly outpaced the industry average of 13.7%. Since the same quarter one year prior, revenues rose by 22.3%. 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 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 542.0% when compared to the same quarter one year prior, rising from $1.97 million to $12.62 million.
- Net operating cash flow has increased to $31.16 million or 30.64% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.00%.
- GOVERNMENT PPTYS INCOME TR's earnings per share declined by 18.2% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, GOVERNMENT PPTYS INCOME TR increased its bottom line by earning $1.02 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $1.02).
- You can view the full Government Properties Income Ratings Report.
- Net operating cash flow has increased to $12,811.00 million or 23.07% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.53%.
- RDS.B's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- ROYAL DUTCH SHELL PLC's earnings per share declined by 6.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $5.18 versus $8.52 in the prior year. This year, the market expects an improvement in earnings ($12.89 versus $5.18).
- RDS.B, with its decline in revenue, slightly underperformed the industry average of 6.7%. Since the same quarter one year prior, revenues slightly dropped by 7.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Royal Dutch Shell Ratings Report.
- Our dividend calendar.