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."Meredith Dividend Yield: 4.30% Meredith (NYSE: MDP) shares currently have a dividend yield of 4.30%. Meredith Corporation operates as a diversified media company that focuses primarily on the home and family marketplace in the United States. It operates in two segments, Local Media and National Media. The company has a P/E ratio of 16.42. The average volume for Meredith has been 222,500 shares per day over the past 30 days. Meredith has a market cap of $1.6 billion and is part of the media industry. Shares are down 22.2% 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 Meredith as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 3.6%. 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 debt-to-equity ratio is somewhat low, currently at 0.87, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MDP's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
- MEREDITH 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MEREDITH CORP increased its bottom line by earning $3.02 versus $2.50 in the prior year. This year, the market expects an improvement in earnings ($3.11 versus $3.02).
- The gross profit margin for MEREDITH CORP is rather high; currently it is at 60.18%. Regardless of MDP'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 2.86% trails the industry average.
- You can view the full Meredith Ratings Report.
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 17.2%. 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 MAIN STREET CAPITAL CORP is currently very high, coming in at 84.88%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 48.50% significantly outperformed against the industry average.
- After a year of stock price fluctuations, the net result is that MAIN'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. 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 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. When compared to other companies in the Capital Markets industry and the overall market, MAIN STREET CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income has decreased by 4.2% when compared to the same quarter one year ago, dropping from $21.57 million to $20.67 million.
- You can view the full Main Street Capital Ratings Report.
- The revenue growth came in higher than the industry average of 6.1%. Since the same quarter one year prior, revenues rose by 26.1%. 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 increased to $53.14 million or 36.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 9.44%.
- CHESAPEAKE LODGING TRUST's earnings per share declined by 19.2% 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, CHESAPEAKE LODGING TRUST increased its bottom line by earning $1.01 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $1.01).
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 5.3% when compared to the same quarter one year ago, dropping from $28.69 million to $27.18 million.
- You can view the full Chesapeake Lodging Ratings Report.
- Our dividend calendar.