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." Starwood Property Dividend Yield: 8.40% Starwood Property (NYSE: STWD) shares currently have a dividend yield of 8.40%. Starwood Property Trust, Inc. originates, acquires, finances, and manages commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments in the United States and Europe. The company has a P/E ratio of 10.59. The average volume for Starwood Property has been 2,682,400 shares per day over the past 30 days. Starwood Property has a market cap of $5.4 billion and is part of the real estate industry. Shares are down 0.7% year-to-date as of the close of trading on Wednesday. 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 Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, expanding profit margins, 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:
- 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 7.5%. 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 gross profit margin for STARWOOD PROPERTY TRUST INC is rather high; currently it is at 61.67%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.08% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $114.15 million or 9.41% when compared to the same quarter last year. In addition, STARWOOD PROPERTY TRUST INC has also modestly surpassed the industry average cash flow growth rate of 0.76%.
- 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, STARWOOD PROPERTY TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Starwood Property Ratings Report.
- VLY's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 9.9%. 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 53.03% to $53.87 million when compared to the same quarter last year. In addition, VALLEY NATIONAL BANCORP has also vastly surpassed the industry average cash flow growth rate of -37.32%.
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 79.49%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VLY's net profit margin of 16.00% significantly trails the industry average.
- VALLEY NATIONAL BANCORP's earnings per share declined by 23.5% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, VALLEY NATIONAL BANCORP reported lower earnings of $0.57 versus $0.67 in the prior year. This year, the market expects an improvement in earnings ($0.59 versus $0.57).
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income has decreased by 10.3% when compared to the same quarter one year ago, dropping from $33.84 million to $30.34 million.
- You can view the full Valley National Bancorp Ratings Report.
- 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 23.4% when compared to the same quarter one year prior, going from $90.47 million to $111.61 million.
- Net operating cash flow has significantly increased by 599.01% to $237.62 million when compared to the same quarter last year. In addition, BUCKEYE PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -53.19%.
- The debt-to-equity ratio is somewhat low, currently at 0.98, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that BPL's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
- BUCKEYE PARTNERS LP's earnings per share improvement from the most recent quarter was slightly positive. 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, BUCKEYE PARTNERS LP reported lower earnings of $2.79 versus $3.23 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $2.79).
- You can view the full Buckeye Partners Ratings Report.
- Our dividend calendar.