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." Spectra Energy Dividend Yield: 4.10% Spectra Energy (NYSE: SE) shares currently have a dividend yield of 4.10%. Spectra Energy Corp, through its subsidiaries, owns and operates a portfolio of natural gas-related energy assets in North America. The company has a P/E ratio of 26.14. The average volume for Spectra Energy has been 3,481,200 shares per day over the past 30 days. Spectra Energy has a market cap of $24.4 billion and is part of the energy industry. Shares are down 1.2% year-to-date as of the close of trading on Tuesday. 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 Spectra Energy as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- 45.78% is the gross profit margin for SPECTRA 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 16.45% significantly outperformed against the industry average.
- Net operating cash flow has increased to $766.00 million or 11.66% when compared to the same quarter last year. In addition, SPECTRA ENERGY CORP has also vastly surpassed the industry average cash flow growth rate of -53.10%.
- Despite the weak revenue results, SE has outperformed against the industry average of 38.3%. Since the same quarter one year prior, revenues fell by 11.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- SPECTRA ENERGY CORP's earnings per share declined by 35.5% 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, SPECTRA ENERGY CORP increased its bottom line by earning $1.61 versus $1.55 in the prior year. For the next year, the market is expecting a contraction of 27.0% in earnings ($1.18 versus $1.61).
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 36.3% when compared to the same quarter one year ago, falling from $419.00 million to $267.00 million.
- You can view the full Spectra Energy Ratings Report.