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." Entergy Dividend Yield: 4.30% Entergy (NYSE: ETR) shares currently have a dividend yield of 4.30%. Entergy Corporation, together with its subsidiaries, engages in the electric power production and retail electric distribution operations in the United States. It operates in two segments, Utility and Entergy Wholesale Commodities. The company has a P/E ratio of 16.52. The average volume for Entergy has been 1,194,400 shares per day over the past 30 days. Entergy has a market cap of $13.7 billion and is part of the utilities industry. Shares are down 12.5% year-to-date as of the close of trading on Monday. 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 Entergy as a buy. Among the primary strengths of the company is its attractive valuation levels, considering its current price compared to earnings, book value and other measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- ENTERGY CORP's earnings per share declined by 26.3% 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, ENTERGY CORP increased its bottom line by earning $5.22 versus $3.98 in the prior year. This year, the market expects an improvement in earnings ($5.52 versus $5.22).
- ETR, with its decline in revenue, underperformed when compared the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 9.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, ETR 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The gross profit margin for ENTERGY CORP is currently lower than what is desirable, coming in at 32.61%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 10.37% trails that of the industry average.
- You can view the full Entergy Ratings Report.