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."Altria Group Dividend Yield: 4.20% Altria Group (NYSE: MO) shares currently have a dividend yield of 4.20%. Altria Group, Inc., through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States and internationally. The company has a P/E ratio of 22.99. The average volume for Altria Group has been 6,663,500 shares per day over the past 30 days. Altria Group has a market cap of $98.6 billion and is part of the tobacco industry. Shares are up 2.9% 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 Altria Group as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- 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 32.24% 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 57.18%. 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 0.2%. 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.
- The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 20.3%. 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 gross profit margin for ACCESS MIDSTREAM PARTNERS LP is rather high; currently it is at 62.83%. Regardless of ACMP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ACMP's net profit margin of 13.13% compares favorably to the industry average.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ACCESS MIDSTREAM PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- ACCESS MIDSTREAM PARTNERS LP 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. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. Despite the past stability of earnings, the consensus estimate anticipates a weakening in earnings. During the past fiscal year, ACCESS MIDSTREAM PARTNERS LP increased its bottom line by earning $1.14 versus $1.13 in the prior year. For the next year, the market is expecting a contraction of 9.2% in earnings ($1.04 versus $1.14).
- In its most recent trading session, ACMP 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, the stock's 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 the other strengths this company displays justify these higher price levels.
- You can view the full Access Midstream 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 -1.92%.
- 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 ($13.67 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.