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." Tallgrass Energy Partners Dividend Yield: 4.20% Tallgrass Energy Partners (NYSE: TEP) shares currently have a dividend yield of 4.20%. Tallgrass Energy Partners, LP acquires, owns, develops, and operates various midstream energy assets in North America. The company operates through three segments: Natural Gas Transportation & Logistics; Crude Oil Transportation & Logistics; and Processing & Logistics. The company has a P/E ratio of 32.48. The average volume for Tallgrass Energy Partners has been 325,800 shares per day over the past 30 days. Tallgrass Energy Partners has a market cap of $3.0 billion and is part of the energy industry. Shares are up 12.9% 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 Tallgrass Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 38.3%. Since the same quarter one year prior, revenues rose by 21.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TALLGRASS ENERGY PRT LP has improved earnings per share by 46.3% 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. We feel that this trend should continue. During the past fiscal year, TALLGRASS ENERGY PRT LP increased its bottom line by earning $1.55 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($1.66 versus $1.55).
- 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 88.7% when compared to the same quarter one year prior, rising from $17.12 million to $32.32 million.
- 44.30% is the gross profit margin for TALLGRASS ENERGY PRT LP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 28.18% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 148.06% to $48.64 million when compared to the same quarter last year. In addition, TALLGRASS ENERGY PRT LP has also vastly surpassed the industry average cash flow growth rate of -53.10%.
- You can view the full Tallgrass Energy Partners Ratings Report.