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."Northwest Dividend Yield: 4.20% Northwest (NASDAQ: NWBI) shares currently have a dividend yield of 4.20%. Northwest Bancshares, Inc. operates as a bank holding company for Northwest Savings Bank that offers various personal and business banking solutions in the United States. The company operates through two segments, Community Banking and Consumer Finance. The company has a P/E ratio of 18.32. The average volume for Northwest has been 695,300 shares per day over the past 30 days. Northwest has a market cap of $1.2 billion and is part of the banking industry. Shares are up 2.5% 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 Northwest as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, reasonable valuation levels, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income increased by 20.8% when compared to the same quarter one year prior, going from $12.67 million to $15.31 million.
- The gross profit margin for NORTHWEST BANCSHARES INC is currently very high, coming in at 83.95%. 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 16.54% trails the industry average.
- Net operating cash flow has slightly increased to $24.60 million or 7.02% when compared to the same quarter last year. Despite an increase in cash flow of 7.02%, NORTHWEST BANCSHARES INC is still growing at a significantly lower rate than the industry average of 72.46%.
- You can view the full Northwest Ratings Report.
- PSEC's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues slightly increased by 9.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 32.3% when compared to the same quarter one year prior, rising from $71.66 million to $94.77 million.
- Net operating cash flow has significantly increased by 175.44% to $133.85 million when compared to the same quarter last year. In addition, PROSPECT CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -410.93%.
- The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 66.79%. Regardless of PSEC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PSEC's net profit margin of 47.66% significantly outperformed against the industry.
- PROSPECT CAPITAL CORP has improved earnings per share by 23.8% 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, PROSPECT CAPITAL CORP reported lower earnings of $0.97 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.97).
- You can view the full Prospect Capital Corporation Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GEO GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
- GEO GROUP INC's earnings per share declined by 29.6% 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, GEO GROUP INC increased its bottom line by earning $1.99 versus $1.64 in the prior year. For the next year, the market is expecting a contraction of 5.3% in earnings ($1.89 versus $1.99).
- The share price of GEO GROUP INC has not done very well: it is down 14.94% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- You can view the full GEO Group Ratings Report.
- Our dividend calendar.