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." TAL International Group Dividend Yield: 7.70% TAL International Group (NYSE: TAL) shares currently have a dividend yield of 7.70%. TAL International Group, Inc., together with its subsidiaries, leases intermodal transportation equipment and provides maritime container management services worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 10.51. The average volume for TAL International Group has been 194,500 shares per day over the past 30 days. TAL International Group has a market cap of $1.2 billion and is part of the diversified services industry. Shares are down 13.9% year-to-date as of the close of trading on Friday. 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 TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- TAL's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 5.4%. 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 $91.25 million or 22.59% when compared to the same quarter last year. Despite an increase in cash flow, TAL INTERNATIONAL GROUP INC's average is still marginally south of the industry average growth rate of 23.59%.
- The gross profit margin for TAL INTERNATIONAL GROUP INC is currently very high, coming in at 85.37%. Regardless of TAL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAL's net profit margin of 15.53% compares favorably to the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Trading Companies & Distributors industry and the overall market on the basis of return on equity, TAL INTERNATIONAL GROUP INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TAL has underperformed the S&P 500 Index, declining 12.72% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full TAL International Group Ratings Report.