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."American Campus Communities Dividend Yield: 4.10% American Campus Communities (NYSE: ACC) shares currently have a dividend yield of 4.10%. American Campus Communities, Inc. is an independent equity real estate investment trust. The firm invests in the real estate markets of the United States. It primarily engages in developing, owning, and managing high-quality student housing communities. The company has a P/E ratio of 37.82. The average volume for American Campus Communities has been 724,200 shares per day over the past 30 days. American Campus Communities has a market cap of $4.4 billion and is part of the real estate industry. Shares are down 4.9% 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 American Campus Communities 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, reasonable valuation levels and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- AMERICAN CAMPUS COMMUNITIES 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 year. We feel that this trend should continue. During the past fiscal year, AMERICAN CAMPUS COMMUNITIES increased its bottom line by earning $0.55 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($1.04 versus $0.55).
- 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 131.7% when compared to the same quarter one year prior, rising from -$5.85 million to $1.86 million.
- ACC, with its decline in revenue, slightly underperformed the industry average of 6.1%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue has not hurt the company's bottom line, with increasing 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAMPUS COMMUNITIES's return on equity is below that of both the industry average and the S&P 500.
- You can view the full American Campus Communities Ratings Report.
- MDC's revenue growth has slightly outpaced the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 12.0%. 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.
- Net operating cash flow has slightly increased to -$71.00 million or 7.77% when compared to the same quarter last year. Despite an increase in cash flow of 7.77%, MDC HOLDINGS INC is still growing at a significantly lower rate than the industry average of 123.90%.
- MDC's debt-to-equity ratio of 0.73 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.
- MDC HOLDINGS INC's earnings per share declined by 6.3% in the most recent quarter compared to the same quarter a year ago. 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, MDC HOLDINGS INC reported lower earnings of $1.29 versus $6.36 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.29).
- You can view the full M D C Holdings Ratings Report.
- WEYERHAEUSER CO reported flat earnings per share in the most recent quarter. 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, WEYERHAEUSER CO increased its bottom line by earning $1.38 versus $0.83 in the prior year. For the next year, the market is expecting a contraction of 25.4% in earnings ($1.03 versus $1.38).
- WY, with its decline in revenue, underperformed when compared the industry average of 6.1%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WEYERHAEUSER CO's return on equity is below that of both the industry average and the S&P 500.
- WY's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 27.53%, which is also worse than the performance of the S&P 500 Index. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full Weyerhaeuser Ratings Report.
- Our dividend calendar.