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." Alliance Resource Partners Dividend Yield: 5.40% Alliance Resource Partners (NASDAQ: ARLP) shares currently have a dividend yield of 5.40%. Alliance Resource Partners, L.P. is engaged in the production and marketing of coal primarily to utilities and industrial users in the United States. It operates 10 underground mining complexes in Illinois, Indiana, Kentucky, Maryland, and West Virginia. The company has a P/E ratio of 10.56. The average volume for Alliance Resource Partners has been 206,800 shares per day over the past 30 days. Alliance Resource Partners has a market cap of $3.5 billion and is part of the metals & mining industry. Shares are up 23.7% year-to-date as of the close of trading on Wednesday. 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 Alliance Resource Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and attractive valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 6.0%. 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. 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.
- ALLIANCE RESOURCE PTNRS -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, ALLIANCE RESOURCE PTNRS -LP increased its bottom line by earning $3.22 versus $3.07 in the prior year. This year, the market expects an improvement in earnings ($4.78 versus $3.22).
- 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 37.6% when compared to the same quarter one year prior, rising from $87.19 million to $119.98 million.
- You can view the full Alliance Resource Partners Ratings Report.
- The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 14.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 15.0% when compared to the same quarter one year prior, going from $286.00 million to $329.00 million.
- 43.16% is the gross profit margin for KINDER MORGAN 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 7.66% is above that of the industry average.
- Net operating cash flow has increased to $1,289.00 million or 21.60% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.53%.
- 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. 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.
- You can view the full Kinder Morgan Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 4.6%. 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 $127.22 million or 9.73% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -31.65%.
- HAWAIIAN ELECTRIC INDS' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, HAWAIIAN ELECTRIC INDS increased its bottom line by earning $1.62 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $1.62).
- 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. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, HAWAIIAN ELECTRIC INDS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Even though the current debt-to-equity ratio is 1.05, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry.
- You can view the full Hawaiian Electric Industries Ratings Report.
- Our dividend calendar.