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." Dupont Fabros Technology Dividend Yield: 5.30% Dupont Fabros Technology (NYSE: DFT) shares currently have a dividend yield of 5.30%. DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 28.25. The average volume for Dupont Fabros Technology has been 549,400 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $2.1 billion and is part of the real estate industry. Shares are down 4.9% 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 Dupont Fabros Technology as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, reasonable valuation levels, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Compared to its closing price of one year ago, DFT's share price has jumped by 29.26%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 5.1%. 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 $49.09 million or 10.34% when compared to the same quarter last year. In addition, DUPONT FABROS TECHNOLOGY INC has also modestly surpassed the industry average cash flow growth rate of 0.73%.
- 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, DUPONT FABROS TECHNOLOGY INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Dupont Fabros Technology Ratings Report.
- EPD, with its decline in revenue, slightly underperformed the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 42.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 20.4% when compared to the same quarter one year ago, dropping from $798.80 million to $636.10 million.
- ENTERPRISE PRODS PRTNRS -LP's earnings per share declined by 24.7% 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, ENTERPRISE PRODS PRTNRS -LP increased its bottom line by earning $1.48 versus $1.41 in the prior year. For the next year, the market is expecting a contraction of 7.1% in earnings ($1.37 versus $1.48).
- The gross profit margin for ENTERPRISE PRODS PRTNRS -LP is rather low; currently it is at 16.08%. Regardless of EPD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, EPD's net profit margin of 8.51% compares favorably to the industry average.
- You can view the full Enterprise Products Partners Ratings Report.
- ENBRIDGE ENERGY PRTNRS -LP has improved earnings per share by 44.4% 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, ENBRIDGE ENERGY PRTNRS -LP turned its bottom line around by earning $0.67 versus -$0.38 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $0.67).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 39.4% when compared to the same quarter one year prior, rising from $119.40 million to $166.50 million.
- 41.01% is the gross profit margin for ENBRIDGE ENERGY PRTNRS -LP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 11.65% is above that of the industry average.
- Net operating cash flow has significantly increased by 80.50% to $380.50 million when compared to the same quarter last year. In addition, ENBRIDGE ENERGY PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -53.17%.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Enbridge Energy Partners Ratings Report.
- Our dividend calendar.