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." Highway Holdings Dividend Yield: 12.00% Highway Holdings (NASDAQ: HIHO) shares currently have a dividend yield of 12.00%. Highway Holdings Limited, through its subsidiaries, manufactures and sells metal, plastic, electric, and electronic components, subassemblies, and finished products for original equipment manufacturers (OEM) and contract manufacturers. The company has a P/E ratio of 20.79. The average volume for Highway Holdings has been 24,100 shares per day over the past 30 days. Highway Holdings has a market cap of $12.6 million and is part of the industrial industry. Shares are up 18.8% 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 Highway Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 3.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HIHO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.05, which clearly demonstrates the ability to cover short-term cash needs.
- Powered by its strong earnings growth of 150.00% and other important driving factors, this stock has surged by 32.07% 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, HIHO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- HIGHWAY HOLDINGS LTD 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. During the past fiscal year, HIGHWAY HOLDINGS LTD increased its bottom line by earning $0.16 versus $0.12 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 143.9% when compared to the same quarter one year prior, rising from $0.15 million to $0.36 million.
- You can view the full Highway Holdings Ratings Report.