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: 8.80% Starwood Property (NYSE: STWD) shares currently have a dividend yield of 8.80%. 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 10.13. The average volume for Starwood Property has been 2,722,700 shares per day over the past 30 days. Starwood Property has a market cap of $5.2 billion and is part of the real estate industry. Shares are down 7.2% 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 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 0.81%.
- 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.
- SEAGATE TECHNOLOGY PLC's earnings per share declined by 24.8% 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, SEAGATE TECHNOLOGY PLC reported lower earnings of $4.52 versus $4.79 in the prior year. This year, the market expects an improvement in earnings ($4.76 versus $4.52).
- The revenue fell significantly faster than the industry average of 33.1%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Computers & Peripherals industry and the overall market, SEAGATE TECHNOLOGY PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, STX has underperformed the S&P 500 Index, declining 10.71% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- The debt-to-equity ratio of 1.23 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, STX's quick ratio is somewhat strong at 1.44, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Seagate Technology Ratings Report.
- EPD, with its decline in revenue, slightly underperformed the industry average of 38.7%. 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 6.8% 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.
- Our dividend calendar.