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.
- The revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues slightly increased by 2.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ENERGY TRANSFER PARTNERS -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, ENERGY TRANSFER PARTNERS -LP turned its bottom line around by earning $1.65 versus -$0.24 in the prior year. This year, the market expects an improvement in earnings ($2.62 versus $1.65).
- 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 120.0% when compared to the same quarter one year prior, rising from -$541.00 million to $108.00 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENERGY TRANSFER PARTNERS -LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- In its most recent trading session, ETP 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. 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 Energy Transfer Partners Ratings Report.
- The revenue growth came in higher than the industry average of 8.4%. Since the same quarter one year prior, revenues rose by 19.4%. 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 3.1% when compared to the same quarter one year prior, going from $38.58 million to $39.79 million.
- SENIOR HOUSING PPTYS TRUST's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SENIOR HOUSING PPTYS TRUST reported lower earnings of $0.81 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.81).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SNH has underperformed the S&P 500 Index, declining 15.74% 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 Senior Housing Properties Ratings Report.
- Our dividend calendar.