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." Medical Properties Dividend Yield: 6.40% Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.40%. Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 32.90. The average volume for Medical Properties has been 1,811,500 shares per day over the past 30 days. Medical Properties has a market cap of $2.9 billion and is part of the real estate industry. Shares are up 0.1% 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 Medical Properties as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, increase in net income, growth in earnings per share and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 8.4%. Since the same quarter one year prior, revenues rose by 30.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 395.7% when compared to the same quarter one year prior, rising from $7.24 million to $35.90 million.
- The gross profit margin for MEDICAL PROPERTIES TRUST is rather high; currently it is at 66.39%. It has increased significantly from the same period last year. Along with this, the net profit margin of 37.40% significantly outperformed against the industry average.
- MEDICAL PROPERTIES TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MEDICAL PROPERTIES TRUST reported lower earnings of $0.28 versus $0.58 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.28).
- In its most recent trading session, MPW 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. 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.
- You can view the full Medical Properties Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 1.8%. 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 gross profit margin for SOUFUN HLDGS LTD is rather high; currently it is at 67.15%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SFUN's net profit margin of 4.94% is significantly lower than the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, SOUFUN HLDGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.05 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, SFUN has managed to keep a strong quick ratio of 2.05, which demonstrates the ability to cover short-term cash needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.18%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 89.58% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full SouFun Holdings Ratings Report.
- GEO's revenue growth has slightly outpaced the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 8.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The net income growth from the same quarter one year ago has 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 2.9% when compared to the same quarter one year prior, going from $27.99 million to $28.80 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- GEO GROUP INC reported flat earnings per share in the most recent quarter. 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, GEO GROUP INC increased its bottom line by earning $1.99 versus $1.64 in the prior year. For the next year, the market is expecting a contraction of 2.0% in earnings ($1.95 versus $1.99).
- You can view the full GEO Group Ratings Report.
- Our dividend calendar.