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."New Jersey Resources Corporation Dividend Yield: 6.10% New Jersey Resources Corporation (NYSE: NJR) shares currently have a dividend yield of 6.10%. New Jersey Resources Corporation, an energy services holding company, provides regulated gas distribution services, and retail and wholesale energy services. The company has a P/E ratio of 9.81. The average volume for New Jersey Resources Corporation has been 497,000 shares per day over the past 30 days. New Jersey Resources Corporation has a market cap of $2.5 billion and is part of the utilities industry. Shares are down 3.2% 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 New Jersey Resources Corporation 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, notable return on equity, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- 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. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 1503.0% when compared to the same quarter one year prior, rising from $7.69 million to $123.32 million.
- 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. In comparison to the other companies in the Gas Utilities industry and the overall market, NEW JERSEY RESOURCES CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Net operating cash flow has significantly increased by 159.35% to $40.85 million when compared to the same quarter last year. In addition, NEW JERSEY RESOURCES CORP has also vastly surpassed the industry average cash flow growth rate of 11.33%.
- The debt-to-equity ratio is somewhat low, currently at 0.90, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.39 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full New Jersey Resources Corporation Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 990.7% when compared to the same quarter one year prior, rising from -$97.00 million to $864.00 million.
- 37.16% is the gross profit margin for DUKE ENERGY CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.24% is above that of the industry average.
- DUKE ENERGY CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DUKE ENERGY CORP increased its bottom line by earning $4.65 versus $3.63 in the prior year. This year, the market expects an improvement in earnings ($4.67 versus $4.65).
- DUK, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Duke Energy Corporation Ratings Report.
- Net operating cash flow has increased to $1,120.00 million or 31.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.33%.
- GAS, with its decline in revenue, underperformed when compared the industry average of 10.5%. Since the same quarter one year prior, revenues fell by 30.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- AGL RESOURCES INC's earnings per share declined by 42.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AGL RESOURCES INC increased its bottom line by earning $4.72 versus $2.45 in the prior year. For the next year, the market is expecting a contraction of 37.5% in earnings ($2.95 versus $4.72).
- Even though the current debt-to-equity ratio is 1.05, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Despite the fact that GAS's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.61 is low and demonstrates weak liquidity.
- You can view the full AGL Resources Ratings Report.
- Our dividend calendar.