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." CenturyLink Dividend Yield: 5.90% CenturyLink (NYSE: CTL) shares currently have a dividend yield of 5.90%. CenturyLink, Inc. provides various communications services to residential, business, governmental, and wholesale customers in the United States. It operates through two segments, Business and Consumer. The company has a P/E ratio of 26.70. The average volume for CenturyLink has been 4,727,900 shares per day over the past 30 days. CenturyLink has a market cap of $20.5 billion and is part of the telecommunications industry. Shares are down 8.3% year-to-date as of the close of trading on Thursday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates CenturyLink as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- CENTURYLINK INC's earnings per share declined by 19.5% 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, CENTURYLINK INC turned its bottom line around by earning $1.35 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($2.56 versus $1.35).
- Net operating cash flow has slightly increased to $1,251.00 million or 8.68% when compared to the same quarter last year. Despite an increase in cash flow, CENTURYLINK INC's average is still marginally south of the industry average growth rate of 10.25%.
- The gross profit margin for CENTURYLINK INC is rather high; currently it is at 56.38%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.23% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.4%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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 CenturyLink Ratings Report.