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."Six Flags Entertainment Dividend Yield: 4.30% Six Flags Entertainment (NYSE: SIX) shares currently have a dividend yield of 4.30%. Six Flags Entertainment Corporation owns and operates regional theme and water parks. The company's parks offer various thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets. The company has a P/E ratio of 63.26. The average volume for Six Flags Entertainment has been 575,400 shares per day over the past 30 days. Six Flags Entertainment has a market cap of $4.5 billion and is part of the leisure industry. Shares are up 9.6% 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 Six Flags Entertainment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 19.1%. 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 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 Hotels, Restaurants & Leisure industry and the overall market, SIX FLAGS ENTERTAINMENT CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 46.33% is the gross profit margin for SIX FLAGS ENTERTAINMENT CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -18.57% is in-line with the industry average.
- SIX FLAGS ENTERTAINMENT CORP 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. 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, SIX FLAGS ENTERTAINMENT CORP reported lower earnings of $0.73 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus $0.73).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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.
- You can view the full Six Flags Entertainment Ratings Report.
- The revenue growth came in higher than the industry average of 12.6%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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 Capital Markets industry average. The net income increased by 26.2% when compared to the same quarter one year prior, rising from $140.80 million to $177.74 million.
- The gross profit margin for ARES CAPITAL CORP is rather high; currently it is at 65.87%. Regardless of ARCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARCC's net profit margin of 70.14% significantly outperformed against the industry.
- ARES CAPITAL CORP has improved earnings per share by 9.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARES CAPITAL CORP reported lower earnings of $1.81 versus $2.20 in the prior year. For the next year, the market is expecting a contraction of 21.5% in earnings ($1.42 versus $1.81).
- ARCC has underperformed the S&P 500 Index, declining 7.68% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Ares Capital Corporation Ratings Report.
- 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 216.6% when compared to the same quarter one year prior, rising from -$82.75 million to $96.52 million.
- BUCKEYE PARTNERS LP has improved earnings per share by 9.3% in the most recent quarter compared to 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, BUCKEYE PARTNERS LP reported lower earnings of $3.11 versus $3.23 in the prior year. This year, the market expects an improvement in earnings ($3.59 versus $3.11).
- BPL, with its decline in revenue, slightly underperformed the industry average of 20.1%. Since the same quarter one year prior, revenues fell by 22.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- In its most recent trading session, BPL 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, 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.
- The gross profit margin for BUCKEYE PARTNERS LP is rather low; currently it is at 17.68%. Regardless of BPL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BPL's net profit margin of 7.50% compares favorably to the industry average.
- You can view the full Buckeye Partners Ratings Report.
- Our dividend calendar.