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." Northern Tier Energy Dividend Yield: 7.40% Northern Tier Energy (NYSE: NTI) shares currently have a dividend yield of 7.40%. Northern Tier Energy LP, an independent downstream energy company, engages in refining, retail, and pipeline operations in the United States. It operates through two segments, Refining and Retail. The company has a P/E ratio of 7.91. The average volume for Northern Tier Energy has been 503,100 shares per day over the past 30 days. Northern Tier Energy has a market cap of $2.5 billion and is part of the energy industry. Shares are up 19.7% year-to-date as of the close of trading on Wednesday. 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 Northern Tier Energy as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity and attractive valuation levels. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The debt-to-equity ratio is somewhat low, currently at 0.77, 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NORTHERN TIER ENERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- NORTHERN TIER ENERGY LP reported significant earnings per share improvement 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 year. We feel that this trend should continue. During the past fiscal year, NORTHERN TIER ENERGY LP increased its bottom line by earning $2.60 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($3.53 versus $2.60).
- 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 55.5% when compared to the same quarter one year prior, rising from $71.50 million to $111.20 million.
- You can view the full Northern Tier Energy Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 8.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- GEO GROUP INC reported flat earnings per share in the most recent quarter. 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, GEO GROUP INC increased its bottom line by earning $1.99 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $1.99).
- 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 company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income increased by 2.9% when compared to the same quarter one year prior, going from $27.99 million to $28.80 million.
- You can view the full GEO Group Ratings Report.
- The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 8.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 55.8% when compared to the same quarter one year prior, rising from $113.00 million to $176.00 million.
- 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 Multi-Utilities industry and the overall market on the basis of return on equity, CENTERPOINT ENERGY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- CENTERPOINT ENERGY INC reported significant earnings per share improvement 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, CENTERPOINT ENERGY INC increased its bottom line by earning $1.42 versus $0.72 in the prior year. For the next year, the market is expecting a contraction of 25.4% in earnings ($1.06 versus $1.42).
- You can view the full CenterPoint Energy Ratings Report.
- Our dividend calendar.