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."Highway Holdings Dividend Yield: 8.20% Highway Holdings (NASDAQ: HIHO) shares currently have a dividend yield of 8.20%. Highway Holdings Limited, through its subsidiaries, manufactures and sells metal, plastic, electric, and electronic components, subassemblies, and finished products for original equipment manufacturers (OEM) and contract manufacturers. The company has a P/E ratio of 30.44. The average volume for Highway Holdings has been 13,500 shares per day over the past 30 days. Highway Holdings has a market cap of $18.5 million and is part of the industrial industry. Shares are up 74.3% 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 Highway Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, increase in net income and attractive valuation levels. We feel its strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 21.8%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- HIHO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, HIHO has a quick ratio of 2.47, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to its closing price of one year ago, HIHO's share price has jumped by 61.77%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HIHO should continue to move higher despite the fact that it has already enjoyed a very nice gain 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 Machinery industry. The net income increased by 5.6% when compared to the same quarter one year prior, going from $0.37 million to $0.39 million.
- You can view the full Highway Holdings Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Consumer Services industry. The net income increased by 7.0% when compared to the same quarter one year prior, going from $1.80 million to $1.93 million.
- CLCT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.50, which illustrates the ability to avoid short-term cash problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Diversified Consumer Services industry and the overall market, COLLECTORS UNIVERSE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for COLLECTORS UNIVERSE INC is rather high; currently it is at 67.12%. It has increased from the same quarter the previous year.
- CLCT, with its decline in revenue, underperformed when compared the industry average of 13.3%. Since the same quarter one year prior, revenues slightly dropped by 9.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Collectors Universe Ratings Report.
- The revenue growth greatly exceeded the industry average of 36.8%. Since the same quarter one year prior, revenues slightly increased by 3.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TC PIPELINES LP has improved earnings per share by 45.8% 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, TC PIPELINES LP increased its bottom line by earning $2.67 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($2.97 versus $2.67).
- 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 58.1% when compared to the same quarter one year prior, rising from $31.00 million to $49.00 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 Oil, Gas & Consumable Fuels industry and the overall market, TC PIPELINES LP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for TC PIPELINES LP is currently very high, coming in at 79.52%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 59.03% significantly outperformed against the industry average.
- You can view the full TC Pipelines Ratings Report.
- Our dividend calendar.