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."Home Properties Dividend Yield: 4.70% Home Properties (NYSE: HME) shares currently have a dividend yield of 4.70%. Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 37.34. The average volume for Home Properties has been 325,800 shares per day over the past 30 days. Home Properties has a market cap of $3.6 billion and is part of the real estate industry. Shares are up 17.7% 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 Home Properties as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, revenue growth, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
- HOME PROPERTIES INC has improved earnings per share by 7.1% 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. We feel that this trend should continue. During the past fiscal year, HOME PROPERTIES INC increased its bottom line by earning $1.65 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.65).
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.8%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HOME PROPERTIES INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Home Properties Ratings Report.
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 14.4%. 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.
- ENERGY TRANSFER PARTNERS -LP's earnings per share declined by 13.7% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ENERGY TRANSFER PARTNERS -LP swung to a loss, reporting -$0.24 versus $5.76 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus -$0.24).
- 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, despite 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.
- The gross profit margin for ENERGY TRANSFER PARTNERS -LP is currently extremely low, coming in at 8.03%. Regardless of ETP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.51% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 3.7% when compared to the same quarter one year ago, dropping from $355.00 million to $342.00 million.
- You can view the full Energy Transfer Partners 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 -2.19%.
- RDS.A'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 ($12.84 versus $5.18).
- RDS.A, with its decline in revenue, slightly underperformed the industry average of 6.4%. 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.