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."Prudential Financial Dividend Yield: 4.20% Prudential Financial (NYSE: PRU) shares currently have a dividend yield of 4.20%. Prudential Financial, Inc. provides insurance, investment management, and other financial products and services to individual and institutional customers in the United States and internationally. The company has a P/E ratio of 8.38. The average volume for Prudential Financial has been 2,643,700 shares per day over the past 30 days. Prudential Financial has a market cap of $30.0 billion and is part of the insurance industry. Shares are down 17.7% year-to-date as of the close of trading on Thursday. 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 Prudential Financial as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 15.4%. Since the same quarter one year prior, revenues rose by 10.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- PRUDENTIAL FINANCIAL 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, PRUDENTIAL FINANCIAL INC turned its bottom line around by earning $3.08 versus -$1.61 in the prior year. This year, the market expects an improvement in earnings ($10.40 versus $3.08).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 186.1% when compared to the same quarter one year prior, rising from $512.00 million to $1,465.00 million.
- 35.79% is the gross profit margin for PRUDENTIAL FINANCIAL INC which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 10.71% is above that of the industry average.
- You can view the full Prudential Financial Ratings Report.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
- NORTHERN TIER ENERGY LP has improved earnings per share by 6.7% 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, NORTHERN TIER ENERGY LP increased its bottom line by earning $2.60 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($4.30 versus $2.60).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 7.6% when compared to the same quarter one year prior, going from $96.20 million to $103.50 million.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, NORTHERN TIER ENERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Northern Tier Energy Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 2.6%. 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 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, GEO GROUP INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- GEO GROUP INC' earnings per share from the most recent quarter came in slightly below the year earlier 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, GEO GROUP INC increased its bottom line by earning $1.99 versus $1.64 in the prior year. For the next year, the market is expecting a contraction of 7.5% in earnings ($1.84 versus $1.99).
- 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 1.7% when compared to the same quarter one year ago, dropping from $38.99 million to $38.31 million.
- You can view the full GEO Group Ratings Report.
- Our dividend calendar.