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."General Motors Dividend Yield: 4.90% General Motors (NYSE: GM) shares currently have a dividend yield of 4.90%. General Motors Company designs, builds, and sells cars, crossovers, trucks, and automobile parts worldwide. It operates through GM North America, GM Europe, GM International Operations, GM South America, and GM Financial segments. The company has a P/E ratio of 10.86. The average volume for General Motors has been 13,935,400 shares per day over the past 30 days. General Motors has a market cap of $46.1 billion and is part of the automotive industry. Shares are down 15% 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 General Motors as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Automobiles industry and the overall market, GENERAL MOTORS CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Net operating cash flow has significantly increased by 204.04% to $3,308.00 million when compared to the same quarter last year. In addition, GENERAL MOTORS CO has also vastly surpassed the industry average cash flow growth rate of 10.70%.
- GENERAL MOTORS CO's earnings per share improvement from the most recent quarter was slightly positive. 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, GENERAL MOTORS CO reported lower earnings of $1.64 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($4.85 versus $1.64).
- GM, with its decline in revenue, slightly underperformed the industry average of 8.9%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full General Motors 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, LAZARD LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- LAZ, with its decline in revenue, slightly underperformed the industry average of 4.2%. Since the same quarter one year prior, revenues slightly dropped by 6.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 8.5% when compared to the same quarter one year ago, dropping from $172.38 million to $157.79 million.
- LAZARD LTD's earnings per share declined by 8.5% 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, LAZARD LTD increased its bottom line by earning $7.41 versus $3.21 in the prior year. For the next year, the market is expecting a contraction of 52.2% in earnings ($3.54 versus $7.41).
- Looking at the price performance of LAZ's shares over the past 12 months, there is not much good news to report: the stock is down 29.06%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. 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 Lazard Ratings Report.
- Our dividend calendar.