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." GEO Group Dividend Yield: 6.90% GEO Group (NYSE: GEO) shares currently have a dividend yield of 6.90%. The GEO Group, Inc. provides government-outsourced services specializing in the management of correctional, detention, and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom, and Canada. The company has a P/E ratio of 18.14. The average volume for GEO Group has been 556,000 shares per day over the past 30 days. GEO Group has a market cap of $2.7 billion and is part of the real estate industry. Shares are down 11.4% 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 GEO Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, increase in net income, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- GEO's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 8.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- 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 2.8% when compared to the same quarter one year prior, going from $27.99 million to $28.78 million.
- 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, GEO GROUP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full GEO Group Ratings Report.
- AVISTA CORP's earnings per share declined by 5.1% 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, AVISTA CORP increased its bottom line by earning $1.94 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($1.97 versus $1.94).
- Despite the weak revenue results, AVA has outperformed against the industry average of 12.3%. Since the same quarter one year prior, revenues slightly dropped by 0.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Multi-Utilities industry average. The net income has decreased by 4.2% when compared to the same quarter one year ago, dropping from $48.50 million to $46.45 million.
- The gross profit margin for AVISTA CORP is currently lower than what is desirable, coming in at 27.78%. Regardless of AVA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 10.40% trails the industry average.
- You can view the full Avista Ratings Report.
- The debt-to-equity ratio is somewhat low, currently at 0.67, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.52, which clearly demonstrates the ability to cover short-term cash needs.
- CVR ENERGY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, CVR ENERGY INC reported lower earnings of $2.00 versus $4.27 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $2.00).
- CVI, with its decline in revenue, slightly underperformed the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 43.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for CVR ENERGY INC is currently extremely low, coming in at 14.68%. Regardless of CVI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.95% trails the industry average.
- Net operating cash flow has decreased to $178.20 million or 36.65% when compared to the same quarter last year. Despite a decrease in cash flow CVR ENERGY INC is still fairing well by exceeding its industry average cash flow growth rate of -53.19%.
- You can view the full CVR Energy Ratings Report.
- Our dividend calendar.