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."Western Gas Partners Dividend Yield: 4.20% Western Gas Partners (NYSE: WES) shares currently have a dividend yield of 4.20%. Western Gas Partners, LP owns, operates, acquires, and develops midstream energy assets in the Rocky Mountains, the Mid-Continent, North-central Pennsylvania, and Texas. The company has a P/E ratio of 37.54. The average volume for Western Gas Partners has been 244,500 shares per day over the past 30 days. Western Gas Partners has a market cap of $8.9 billion and is part of the energy industry. Shares are down 5.9% 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 Western Gas Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 38.5%. Since the same quarter one year prior, revenues rose by 27.7%. 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 debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- Net operating cash flow has increased to $156.04 million or 25.78% when compared to the same quarter last year. In addition, WESTERN GAS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -53.34%.
- 45.99% is the gross profit margin for WESTERN GAS PARTNERS LP which we consider to be strong. Regardless of WES's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WES's net profit margin of 22.27% significantly outperformed against the industry.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 8.2% when compared to the same quarter one year ago, dropping from $91.06 million to $83.57 million.
- You can view the full Western Gas Partners Ratings Report.
- The revenue growth came in higher than the industry average of 8.4%. Since the same quarter one year prior, revenues rose by 19.4%. 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 $104.14 million or 15.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.10%.
- 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 3.1% when compared to the same quarter one year prior, going from $38.58 million to $39.79 million.
- SENIOR HOUSING PPTYS TRUST's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SENIOR HOUSING PPTYS TRUST reported lower earnings of $0.81 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.81).
- You can view the full Senior Housing Properties Ratings Report.
- HIMX's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, HIMX has a quick ratio of 1.53, which demonstrates the ability of the company to cover short-term liquidity needs.
- HIMX, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 8.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- HIMAX TECHNOLOGIES INC's earnings per share declined by 22.2% 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, HIMAX TECHNOLOGIES INC increased its bottom line by earning $0.39 versus $0.35 in the prior year. For the next year, the market is expecting a contraction of 18.7% in earnings ($0.32 versus $0.39).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HIMX has underperformed the S&P 500 Index, declining 15.17% 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 Himax Technologies Ratings Report.
- Our dividend calendar.