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."PacWest Bancorp Dividend Yield: 6.30% PacWest Bancorp (NASDAQ: PACW) shares currently have a dividend yield of 6.30%. PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits. The company has a P/E ratio of 11.78. The average volume for PacWest Bancorp has been 1,136,800 shares per day over the past 30 days. PacWest Bancorp has a market cap of $3.8 billion and is part of the banking industry. Shares are down 26.9% 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 PacWest Bancorp as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, expanding profit margins, reasonable valuation levels and notable return on equity. 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 0.2%. Since the same quarter one year prior, revenues rose by 22.1%. 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.
- PACWEST BANCORP's earnings per share declined by 14.5% 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, PACWEST BANCORP increased its bottom line by earning $2.81 versus $1.97 in the prior year. This year, the market expects an improvement in earnings ($2.95 versus $2.81).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 1.2% when compared to the same quarter one year prior, going from $71.00 million to $71.84 million.
- The gross profit margin for PACWEST BANCORP is currently very high, coming in at 89.66%. Regardless of PACW'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 26.45% trails the industry average.
- You can view the full PacWest Bancorp Ratings Report.
- The revenue growth greatly exceeded the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 37.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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. In comparison to the other companies in the Capital Markets industry and the overall market, BGC PARTNERS INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- BGC PARTNERS 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, BGC PARTNERS INC increased its bottom line by earning $0.49 versus $0.02 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.49).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 447.9% when compared to the same quarter one year prior, rising from -$18.69 million to $65.02 million.
- BGCP is off 7.61% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared to the year-earlier quarter. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
- You can view the full BGC Partners Ratings Report.
- The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 1.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- FIRSTENERGY CORP has improved earnings per share by 27.4% 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, FIRSTENERGY CORP increased its bottom line by earning $1.37 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $1.37).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electric Utilities industry average. The net income increased by 26.1% when compared to the same quarter one year prior, rising from -$306.00 million to -$226.00 million.
- Net operating cash flow has increased to $1,130.00 million or 15.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.77%.
- 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 Electric Utilities industry and the overall market, FIRSTENERGY CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full FirstEnergy Ratings Report.
- Our dividend calendar.