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." Dupont Fabros Technology Dividend Yield: 5.50% Dupont Fabros Technology (NYSE: DFT) shares currently have a dividend yield of 5.50%. DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 25.86. The average volume for Dupont Fabros Technology has been 669,500 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $2.0 billion and is part of the real estate industry. Shares are down 8.2% 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 Dupont Fabros Technology as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, revenue growth, reasonable valuation levels and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- Powered by its strong earnings growth of 55.55% and other important driving factors, this stock has surged by 28.55% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 38.7% when compared to the same quarter one year prior, rising from $18.27 million to $25.35 million.
- 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 8.5%. 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 increased to $72.70 million or 36.88% when compared to the same quarter last year. In addition, DUPONT FABROS TECHNOLOGY INC has also vastly surpassed the industry average cash flow growth rate of -62.88%.
- You can view the full Dupont Fabros Technology Ratings Report.