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."Ventas Dividend Yield: 4.80% Ventas (NYSE: VTR) shares currently have a dividend yield of 4.80%. Ventas, Inc. is a publicly owned real estate investment trust. The firm engages in investment, management, financing, and leasing of properties in the healthcare industry. It invests in the real estate markets of the United States and Canada. The company has a P/E ratio of 50.83. The average volume for Ventas has been 3,168,900 shares per day over the past 30 days. Ventas has a market cap of $20.5 billion and is part of the real estate industry. Shares are up 9.6% 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 Ventas as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, increase in net income 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:
- VTR's revenue growth has slightly outpaced the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 15.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 16.4% when compared to the same quarter one year prior, going from $107.19 million to $124.73 million.
- Net operating cash flow has increased to $369.72 million or 10.40% when compared to the same quarter last year. In addition, VENTAS INC has also modestly surpassed the industry average cash flow growth rate of 3.64%.
- VENTAS INC has improved earnings per share by 31.0% 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, VENTAS INC reported lower earnings of $1.23 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.23).
- The gross profit margin for VENTAS INC is currently lower than what is desirable, coming in at 29.08%. Regardless of VTR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, VTR's net profit margin of 14.82% is significantly lower than the industry average.
- You can view the full Ventas Ratings Report.
- ARI's very impressive revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues leaped by 57.6%. 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 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 23.6% when compared to the same quarter one year prior, going from $22.04 million to $27.24 million.
- The gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 86.09%. Regardless of ARI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARI's net profit margin of 45.80% significantly outperformed against the industry.
- APOLLO COMMERCIAL RE FIN INC's earnings per share declined by 25.6% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, APOLLO COMMERCIAL RE FIN INC reported lower earnings of $1.57 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.57).
- You can view the full Apollo Commercial Real Estate Finance Ratings Report.
- GRMN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, GRMN has a quick ratio of 1.82, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has slightly increased to $158.34 million or 9.18% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.90%.
- The gross profit margin for GARMIN LTD is rather high; currently it is at 54.59%. Regardless of GRMN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GRMN's net profit margin of 16.94% significantly outperformed against the industry.
- 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 Household Durables industry and the overall market on the basis of return on equity, GARMIN LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- GRMN, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Garmin Ratings Report.
- Our dividend calendar.