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."Ship Finance International Dividend Yield: 10.70% Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 10.70%. Ship Finance International Limited owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. It is also involved in the charter, purchase, and sale of assets. The company has a P/E ratio of 16.64. The average volume for Ship Finance International has been 608,500 shares per day over the past 30 days. Ship Finance International has a market cap of $1.5 billion and is part of the transportation industry. Shares are up 17.4% year-to-date as of the close of trading on Tuesday. 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 Ship Finance International as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 34.5%. Since the same quarter one year prior, revenues rose by 26.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SHIP FINANCE INTL LTD 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 year. We feel that this trend should continue. During the past fiscal year, SHIP FINANCE INTL LTD increased its bottom line by earning $1.25 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($2.36 versus $1.25).
- 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 203.9% when compared to the same quarter one year prior, rising from $22.36 million to $67.94 million.
- The gross profit margin for SHIP FINANCE INTL LTD is currently very high, coming in at 71.74%. It has increased significantly from the same period last year. Along with this, the net profit margin of 73.83% significantly outperformed against the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SHIP FINANCE INTL LTD's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ship Finance International Ratings Report.
- 35.14% is the gross profit margin for BLACK HILLS CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -15.36% is in-line with the industry average.
- Net operating cash flow has increased to $102.92 million or 35.89% when compared to the same quarter last year. Despite an increase in cash flow, BLACK HILLS CORP's average is still marginally south of the industry average growth rate of 42.06%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.5%. Since the same quarter one year prior, revenues slightly dropped by 3.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- BLACK HILLS CORP 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. 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, BLACK HILLS CORP increased its bottom line by earning $2.91 versus $2.61 in the prior year. This year, the market expects earnings to be in line with last year ($2.91 versus $2.91).
- Even though the current debt-to-equity ratio is 1.28, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.47 is very low and demonstrates very weak liquidity.
- You can view the full Black Hills Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- RLJ LODGING TRUST reported flat earnings per share in the most recent quarter. 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, RLJ LODGING TRUST increased its bottom line by earning $1.05 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.05).
- Net operating cash flow has slightly increased to $101.87 million or 1.38% when compared to the same quarter last year. Despite an increase in cash flow, RLJ LODGING TRUST's cash flow growth rate is still lower than the industry average growth rate of 15.97%.
- 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 5.8% when compared to the same quarter one year prior, going from $52.90 million to $55.99 million.
- You can view the full RLJ Lodging Ratings Report.
- Our dividend calendar.