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."American Campus Communities Dividend Yield: 4.10% American Campus Communities (NYSE: ACC) shares currently have a dividend yield of 4.10%. American Campus Communities, Inc. is an independent equity real estate investment trust. The firm invests in the real estate markets of the United States. It primarily engages in developing, owning, and managing high-quality student housing communities. The company has a P/E ratio of 40.80. The average volume for American Campus Communities has been 685,500 shares per day over the past 30 days. American Campus Communities has a market cap of $4.4 billion and is part of the real estate industry. Shares are down 6.3% 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 American Campus Communities as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, increase in net income, revenue growth, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- AMERICAN CAMPUS COMMUNITIES reported significant earnings per share improvement 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 year. We feel that this trend should continue. During the past fiscal year, AMERICAN CAMPUS COMMUNITIES increased its bottom line by earning $0.55 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.55).
- 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 147.2% when compared to the same quarter one year prior, rising from $28.40 million to $70.20 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 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $74.23 million or 21.56% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.10%.
- 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, AMERICAN CAMPUS COMMUNITIES underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full American Campus Communities Ratings Report.
- EDR's revenue growth has slightly outpaced the industry average of 8.4%. Since the same quarter one year prior, revenues rose by 17.2%. 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 significantly increased by 67.77% to $28.83 million when compared to the same quarter last year. In addition, EDUCATION REALTY TRUST INC has also vastly surpassed the industry average cash flow growth rate of 3.10%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, EDUCATION REALTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Education Realty Ratings Report.
- The revenue growth came in higher than the industry average of 23.2%. Since the same quarter one year prior, revenues slightly increased by 6.6%. 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's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Tobacco industry and the overall market, ALTRIA GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for ALTRIA GROUP INC is rather high; currently it is at 58.97%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.82% is above that of the industry average.
- Net operating cash flow has increased to $2,498.00 million or 17.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -30.89%.
- Compared to its closing price of one year ago, MO's share price has jumped by 27.06%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full Altria Group Ratings Report.
- Our dividend calendar.