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 generation and distribution of electricity in the United States. It operates in two segments, Utility and Entergy Wholesale Commodities. The average volume for Entergy has been 1,424,000 shares per day over the past 30 days. Entergy has a market cap of $13.2 billion and is part of the utilities industry. Shares are up 8.2% year-to-date as of the close of trading on Monday. 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 a solid financial position based on a variety of debt and liquidity measures that we have looked at. 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 8.1%. 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 ($5.20 versus -$1.00).
- ETR is off 5.61% 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.
- 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 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.
- The debt-to-equity ratio of 1.45 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, ETR has a quick ratio of 0.68, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Entergy Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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 debt-to-equity ratio is somewhat low, currently at 0.83, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MDP's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
- MEREDITH CORP's earnings per share declined by 17.2% 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, MEREDITH CORP increased its bottom line by earning $3.02 versus $2.50 in the prior year. This year, the market expects an improvement in earnings ($3.17 versus $3.02).
- The gross profit margin for MEREDITH CORP is rather high; currently it is at 62.83%. Regardless of MDP'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 8.00% trails the industry average.
- You can view the full Meredith Ratings Report.
- The revenue growth greatly exceeded the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 41.4%. 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 Food Products industry and the overall market, B&G FOODS INC's return on equity exceeds that of both the industry average and the S&P 500.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- B&G FOODS INC's earnings per share declined by 9.5% 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, B&G FOODS INC increased its bottom line by earning $1.22 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($2.01 versus $1.22).
- 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 Food Products industry average. The net income has decreased by 4.3% when compared to the same quarter one year ago, dropping from $11.45 million to $10.96 million.
- You can view the full B&G Foods Ratings Report.
- Our dividend calendar.