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."Tallgrass Energy Partners Dividend Yield: 4.90% Tallgrass Energy Partners (NYSE: TEP) shares currently have a dividend yield of 4.90%. Tallgrass Energy Partners, LP acquires, owns, develops, and operates various midstream energy assets in North America. The company operates through three segments: Natural Gas Transportation & Logistics; Crude Oil Transportation & Logistics; and Processing & Logistics. The company has a P/E ratio of 27.91. The average volume for Tallgrass Energy Partners has been 191,400 shares per day over the past 30 days. Tallgrass Energy Partners has a market cap of $2.9 billion and is part of the energy industry. Shares are up 4.5% year-to-date as of the close of trading on Friday. 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 Tallgrass Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- TEP's very impressive revenue growth greatly exceeded the industry average of 34.6%. Since the same quarter one year prior, revenues leaped by 72.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- TALLGRASS ENERGY PRT LP reported significant earnings per share improvement 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 two years. We feel that this trend should continue. During the past fiscal year, TALLGRASS ENERGY PRT LP increased its bottom line by earning $1.55 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($2.19 versus $1.55).
- 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 193.7% when compared to the same quarter one year prior, rising from $15.29 million to $44.90 million.
- The gross profit margin for TALLGRASS ENERGY PRT LP is rather high; currently it is at 57.69%. It has increased significantly from the same period last year. Along with this, the net profit margin of 33.76% significantly outperformed against the industry average.
- You can view the full Tallgrass Energy Partners Ratings Report.
- NNN's revenue growth has slightly outpaced the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 10.9%. 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 increased to $70.69 million or 21.01% when compared to the same quarter last year. In addition, NATIONAL RETAIL PROPERTIES has also modestly surpassed the industry average cash flow growth rate of 15.86%.
- The gross profit margin for NATIONAL RETAIL PROPERTIES is rather high; currently it is at 57.44%. Regardless of NNN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NNN's net profit margin of 39.39% compares favorably to the industry average.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income increased by 1.4% when compared to the same quarter one year prior, going from $45.57 million to $46.19 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NATIONAL RETAIL PROPERTIES's return on equity is below that of both the industry average and the S&P 500.
- You can view the full National Retail Properties Ratings Report.
- 37.38% is the gross profit margin for SOUTHERN CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.84% is above that of the industry average.
- SOUTHERN CO's earnings per share improvement from the most recent quarter was slightly positive. 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, SOUTHERN CO increased its bottom line by earning $2.18 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $2.18).
- 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 Electric Utilities industry average. The net income increased by 2.5% when compared to the same quarter one year prior, going from $628.00 million to $644.00 million.
- Net operating cash flow has increased to $1,194.00 million or 23.47% when compared to the same quarter last year. Despite an increase in cash flow, SOUTHERN CO's average is still marginally south of the industry average growth rate of 23.63%.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full Southern Ratings Report.
- Our dividend calendar.