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."Ventas Dividend Yield: 5.00% Ventas (NYSE: VTR) shares currently have a dividend yield of 5.00%. Ventas, Inc. is a publicly owned real estate investment trust. The firm engages in investment, management, financing, and leasing of properties in the healthcare industry. It invests in the real estate markets of the United States and Canada. The company has a P/E ratio of 37.91. The average volume for Ventas has been 2,810,600 shares per day over the past 30 days. Ventas has a market cap of $19.4 billion and is part of the real estate industry. Shares are down 23.1% 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 Ventas as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- VTR's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 18.6%. 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 net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 8.3% when compared to the same quarter one year prior, going from $138.40 million to $149.82 million.
- Net operating cash flow has increased to $373.56 million or 20.00% when compared to the same quarter last year. In addition, VENTAS INC has also modestly surpassed the industry average cash flow growth rate of 13.29%.
- VENTAS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, VENTAS INC reported lower earnings of $1.60 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus $1.60).
- You can view the full Ventas Ratings Report.
- The revenue growth came in higher than the industry average of 5.1%. 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.
- The gross profit margin for ARES CAPITAL CORP is rather high; currently it is at 67.16%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 58.73% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 222.64% to $127.58 million when compared to the same quarter last year. In addition, ARES CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 65.52%.
- 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 2.6% when compared to the same quarter one year prior, going from $142.83 million to $146.52 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, ARES CAPITAL CORP 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 Ares Capital Corporation Ratings Report.
- OHI's very impressive revenue growth greatly exceeded the industry average of 9.8%. Since the same quarter one year prior, revenues leaped by 62.3%. 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 slightly increased to $89.80 million or 1.23% when compared to the same quarter last year. Despite an increase in cash flow, OMEGA HEALTHCARE INVS INC's cash flow growth rate is still lower than the industry average growth rate of 13.29%.
- The gross profit margin for OMEGA HEALTHCARE INVS INC is rather high; currently it is at 66.59%. Regardless of OHI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.95% trails the industry average.
- OMEGA HEALTHCARE INVS INC's earnings per share declined by 40.5% 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, OMEGA HEALTHCARE INVS INC increased its bottom line by earning $1.74 versus $1.46 in the prior year. For the next year, the market is expecting a contraction of 24.1% in earnings ($1.32 versus $1.74).
- In its most recent trading session, OHI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 Omega Healthcare Investors Ratings Report.
- Our dividend calendar.