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."Entergy Dividend Yield: 4.60% Entergy (NYSE: ETR) shares currently have a dividend yield of 4.60%. Entergy Corporation, together with its subsidiaries, engages in the electric power production and retail electric distribution operations in the United States. It operates in two segments, Utility and Entergy Wholesale Commodities. The company has a P/E ratio of 12.60. The average volume for Entergy has been 1,441,300 shares per day over the past 30 days. Entergy has a market cap of $13.1 billion and is part of the utilities industry. Shares are up 8.6% 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 Entergy as a buy. The company's strongest point has been its strong cash flow from operations. We feel its strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- ETR, with its decline in revenue, slightly underperformed the industry average of 10.1%. Since the same quarter one year prior, revenues fell by 11.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- ENTERGY CORP's earnings per share declined by 15.2% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ENTERGY CORP swung to a loss, reporting -$1.00 versus $5.22 in the prior year. This year, the market expects an improvement in earnings ($5.05 versus -$1.00).
- ETR is off 8.50% from its price level of one year ago, reflecting a combination of (a) the general market trend and (b) the company's own weaknesses, including its lower earnings per share compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- Net operating cash flow has declined marginally to $941.54 million or 5.66% when compared to the same quarter last year. Despite a decrease in cash flow of 5.66%, ENTERGY CORP is in line with the industry average cash flow growth rate of -11.77%.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Electric Utilities industry average. The net income has decreased by 16.1% when compared to the same quarter one year ago, dropping from $125.01 million to $104.85 million.
- You can view the full Entergy Ratings Report.
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 16.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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, GEO GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
- 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 15.8% when compared to the same quarter one year prior, going from $38.05 million to $44.06 million.
- GEO GROUP INC has improved earnings per share by 13.5% 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, GEO GROUP INC reported lower earnings of $1.88 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($2.02 versus $1.88).
- You can view the full GEO Group Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 0.2% when compared to the same quarter one year prior, going from $52.64 million to $52.75 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 6.8%. 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.
- EPR PROPERTIES' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, EPR PROPERTIES increased its bottom line by earning $2.93 versus $2.78 in the prior year. This year, the market expects an improvement in earnings ($3.08 versus $2.93).
- The gross profit margin for EPR PROPERTIES is currently very high, coming in at 72.53%. Regardless of EPR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPR's net profit margin of 46.99% significantly outperformed against the industry.
- Compared to where it was trading a year ago, EPR's share price has not changed very much due to (a) the relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and (c) other mixed results. 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.
- You can view the full EPR Properties Ratings Report.
- Our dividend calendar.