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: 4.10% Home Properties (NYSE: HME) shares currently have a dividend yield of 4.10%. 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 41.96. The average volume for Home Properties has been 308,700 shares per day over the past 30 days. Home Properties has a market cap of $4.0 billion and is part of the real estate industry. Shares are up 8.3% 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, revenue growth, reasonable valuation levels, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- 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 32.78% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HME should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $69.75 million or 1.16% when compared to the same quarter last year. In addition, HOME PROPERTIES INC has also modestly surpassed the industry average cash flow growth rate of -7.14%.
- 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, HOME PROPERTIES INC increased its bottom line by earning $1.65 versus $1.24 in the prior year. For the next year, the market is expecting a contraction of 0.6% in earnings ($1.64 versus $1.65).
- You can view the full Home Properties Ratings Report.
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 34.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant 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, despite the company's weak earnings results. 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.
- The net income growth from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 11.3% when compared to the same quarter one year prior, going from $25.65 million to $28.54 million.
- Net operating cash flow has remained constant at $45.49 million with no significant change when compared to the same quarter last year. In addition, MEDICAL PROPERTIES TRUST has modestly surpassed the industry average cash flow growth rate of -7.14%.
- The gross profit margin for MEDICAL PROPERTIES TRUST is rather high; currently it is at 66.30%. Regardless of MPW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MPW's net profit margin of 34.83% compares favorably to the industry average.
- You can view the full Medical Properties Ratings Report.
- The revenue growth came in higher than the industry average of 21.7%. Since the same quarter one year prior, revenues rose by 35.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although SLF's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 193.9% when compared to the same quarter one year prior, rising from -$491.00 million to $461.00 million.
- Net operating cash flow has significantly increased by 55.77% to $958.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.10%.
- You can view the full Sun Life Financial Ratings Report.
- Our dividend calendar.