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."Healthcare Realty Dividend Yield: 4.40% Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.40%. Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The company has a P/E ratio of 55.69. The average volume for Healthcare Realty has been 883,900 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.7 billion and is part of the real estate industry. Shares are down 0.7% 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 Healthcare Realty as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- HEALTHCARE REALTY TRUST INC 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, HEALTHCARE REALTY TRUST INC turned its bottom line around by earning $0.34 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.65 versus $0.34).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 588.5% when compared to the same quarter one year prior, rising from $3.99 million to $27.48 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has significantly increased by 72.16% to $45.52 million when compared to the same quarter last year. In addition, HEALTHCARE REALTY TRUST INC has also vastly surpassed the industry average cash flow growth rate of 9.41%.
- After a year of stock price fluctuations, the net result is that HR's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Healthcare Realty Ratings Report.
- MIC's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 7.0%. 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 gross profit margin for MACQUARIE INFRASTRUCTURE CP is rather high; currently it is at 56.85%. 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 2.55% trails the industry average.
- 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, despite the company's weak earnings results. 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.
- MIC's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.77 is weak.
- MACQUARIE INFRASTRUCTURE CP 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, MACQUARIE INFRASTRUCTURE CP increased its bottom line by earning $14.70 versus $0.60 in the prior year. For the next year, the market is expecting a contraction of 109.1% in earnings (-$1.33 versus $14.70).
- You can view the full Macquarie Infrastructure Ratings Report.
- DUK's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 1.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 40.17% is the gross profit margin for DUKE ENERGY 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 14.37% trails the industry average.
- DUKE ENERGY CORP has improved earnings per share by 8.8% 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, DUKE ENERGY CORP reported lower earnings of $3.46 versus $3.63 in the prior year. This year, the market expects an improvement in earnings ($4.59 versus $3.46).
- Even though the current debt-to-equity ratio is 1.07, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.32 is very low and demonstrates very weak liquidity.
- Net operating cash flow has declined marginally to $2,517.00 million or 1.21% when compared to the same quarter last year. Despite a decrease in cash flow of 1.21%, DUKE ENERGY CORP is in line with the industry average cash flow growth rate of -7.89%.
- You can view the full Duke Energy Corporation Ratings Report.
- Our dividend calendar.