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."Verizon Communications Dividend Yield: 4.40% Verizon Communications (NYSE: VZ) shares currently have a dividend yield of 4.40%. Verizon Communications Inc., through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The company has a P/E ratio of 21.74. The average volume for Verizon Communications has been 14,727,000 shares per day over the past 30 days. Verizon Communications has a market cap of $203.1 billion and is part of the telecommunications industry. Shares are up 6% year-to-date as of the close of trading on Monday. 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 Verizon Communications as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- VZ's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 3.8%. 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 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 Diversified Telecommunication Services industry average. The net income increased by 6.9% when compared to the same quarter one year prior, going from $3,947.00 million to $4,219.00 million.
- Net operating cash flow has increased to $10,169.00 million or 42.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.75%.
- The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 62.18%. Regardless of VZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VZ's net profit margin of 13.19% compares favorably to the industry average.
- VERIZON COMMUNICATIONS INC's earnings per share declined by 11.3% 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, VERIZON COMMUNICATIONS INC reported lower earnings of $2.51 versus $4.00 in the prior year. This year, the market expects an improvement in earnings ($3.85 versus $2.51).
- You can view the full Verizon Communications 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 19.1%. 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.
- Net operating cash flow has increased to $344.17 million or 21.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.03%.
- In its most recent trading session, VTR 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.
- VENTAS INC's earnings per share declined by 7.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, VENTAS INC reported lower earnings of $1.60 versus $1.66 in the prior year. For the next year, the market is expecting a contraction of 1.9% in earnings ($1.57 versus $1.60).
- The company, on the basis of change in net income 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 has decreased by 0.5% when compared to the same quarter one year ago, dropping from $121.05 million to $120.44 million.
- You can view the full Ventas Ratings Report.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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 net income growth from the same quarter one year ago has greatly 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 10.7% when compared to the same quarter one year prior, going from $51.74 million to $57.28 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, CORRECTIONS CORP AMER has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Corrections Corp of America Ratings Report.
- Our dividend calendar.