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: 5.00% Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 5.00%. 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 23.18. The average volume for Plains All American Pipeline has been 1,151,500 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $19.7 billion and is part of the energy industry. Shares are up 3.5% 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 Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 4.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.94, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- 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 39.8% when compared to the same quarter one year prior, rising from $231.00 million to $323.00 million.
- Net operating cash flow has increased to $315.00 million or 22.56% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.19%.
- You can view the full Plains All American Pipeline Ratings Report.
- The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 29.5%. 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 gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 41.63% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 139.68% to $97.41 million when compared to the same quarter last year. In addition, PROSPECT CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -193.96%.
- PROSPECT CAPITAL CORP's earnings per share declined by 22.6% 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, PROSPECT CAPITAL CORP increased its bottom line by earning $1.08 versus $1.07 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus $1.08).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income increased by 5.3% when compared to the same quarter one year prior, going from $79.90 million to $84.11 million.
- You can view the full Prospect Capital Corporation Ratings Report.
- FIG's very impressive revenue growth greatly exceeded the industry average of 1.2%. Since the same quarter one year prior, revenues leaped by 74.0%. 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, FORTRESS INVESTMENT GRP LLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $160.72 million or 14.44% when compared to the same quarter last year. In addition, FORTRESS INVESTMENT GRP LLC has also vastly surpassed the industry average cash flow growth rate of -193.96%.
- FORTRESS INVESTMENT GRP LLC 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FORTRESS INVESTMENT GRP LLC turned its bottom line around by earning $0.65 versus -$0.08 in the prior year. This year, the market expects an improvement in earnings ($0.76 versus $0.65).
- In its most recent trading session, FIG 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. 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.
- You can view the full Fortress Investment Group Ratings Report.
- Our dividend calendar.