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." BioMed Realty Dividend Yield: 5.20% BioMed Realty (NYSE: BMR) shares currently have a dividend yield of 5.20%. BioMed Realty Trust, Inc. operates as a real estate investment trust (REIT) that focuses on providing real estate to the life science industry in the United States. The company has a P/E ratio of 20.66. The average volume for BioMed Realty has been 1,560,600 shares per day over the past 30 days. BioMed Realty has a market cap of $4.0 billion and is part of the real estate industry. Shares are down 7.9% 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 BioMed Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels 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 8.4%. Since the same quarter one year prior, revenues slightly increased by 5.6%. 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 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, BIOMED REALTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.
- BIOMED REALTY TRUST INC's earnings per share declined by 20.0% 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, BIOMED REALTY TRUST INC increased its bottom line by earning $0.98 versus $0.20 in the prior year. For the next year, the market is expecting a contraction of 86.7% in earnings ($0.13 versus $0.98).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, BMR has underperformed the S&P 500 Index, declining 7.63% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- You can view the full BioMed Realty Ratings Report.