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."CenturyLink Dividend Yield: 6.80% CenturyLink (NYSE: CTL) shares currently have a dividend yield of 6.80%. CenturyLink, Inc. provides various communications services to residential, business, wholesale, and governmental customers in the United States. It operates through two segments, Business and Consumer. The company has a P/E ratio of 18.92. The average volume for CenturyLink has been 6,146,200 shares per day over the past 30 days. CenturyLink has a market cap of $17.2 billion and is part of the telecommunications industry. Shares are up 26.7% year-to-date as of the close of trading on Wednesday. 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 CenturyLink as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, expanding profit margins, notable return on equity and increase in net income. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- CENTURYLINK 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, CENTURYLINK INC increased its bottom line by earning $1.59 versus $1.35 in the prior year. This year, the market expects an improvement in earnings ($2.61 versus $1.59).
- CTL's revenue growth trails the industry average of 14.7%. Since the same quarter one year prior, revenues slightly increased by 0.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for CENTURYLINK INC is rather high; currently it is at 57.28%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.55% trails the industry average.
- 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CENTURYLINK INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Diversified Telecommunication Services industry average, but is greater than that of the S&P 500. The net income increased by 79.8% when compared to the same quarter one year prior, rising from $188.00 million to $338.00 million.
- You can view the full CenturyLink Ratings Report.
- The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 19.3%. 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.
- Net operating cash flow has increased to $337.14 million or 18.50% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.63%.
- 35.53% is the gross profit margin for WELLTOWER INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, HCN's net profit margin of 14.54% significantly trails the industry average.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, WELLTOWER INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Welltower Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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.
- The debt-to-equity ratio is somewhat low, currently at 0.86, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.26 is very weak and demonstrates a lack of ability to pay short-term obligations.
- KOHL'S CORP's earnings per share declined by 13.7% 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, KOHL'S CORP reported lower earnings of $3.50 versus $4.26 in the prior year. This year, the market expects an improvement in earnings ($4.10 versus $3.50).
- Looking at the price performance of KSS's shares over the past 12 months, there is not much good news to report: the stock is down 37.88%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full Kohl's Ratings Report.
- Our dividend calendar.