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."Chesapeake Lodging Dividend Yield: 7.10% Chesapeake Lodging (NYSE: CHSP) shares currently have a dividend yield of 7.10%. Chesapeake Lodging Trust is a self-advised real estate investment trust organized in the state of Maryland in June 2009. The company focuses on investments primarily in upper-upscale hotels in major business and convention markets and premium select-service hotels in urban settings or unique locations in the United States. The company has a P/E ratio of 19.57. The average volume for Chesapeake Lodging has been 308,800 shares per day over the past 30 days. Chesapeake Lodging has a market cap of $1.4 billion and is part of the real estate industry. Shares are down 9.5% year-to-date as of the close of trading on Tuesday. 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 Chesapeake Lodging as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, reasonable valuation levels, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 28.6%. Growth in the company's revenue appears to have helped boost the 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 548.8% when compared to the same quarter one year prior, rising from $1.55 million to $10.07 million.
- Net operating cash flow has significantly increased by 285.43% to $25.07 million when compared to the same quarter last year. In addition, CHESAPEAKE LODGING TRUST has also vastly surpassed the industry average cash flow growth rate of 11.09%.
- CHESAPEAKE LODGING TRUST reported significant earnings per share improvement 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, CHESAPEAKE LODGING TRUST reported lower earnings of $0.97 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $0.97).
- You can view the full Chesapeake Lodging Ratings Report.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
- TOOTSIE ROLL INDUSTRIES INC has improved earnings per share by 9.9% 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. During the past fiscal year, TOOTSIE ROLL INDUSTRIES INC increased its bottom line by earning $1.05 versus $0.99 in the prior year.
- TR, with its decline in revenue, underperformed when compared the industry average of 17.3%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Food Products industry average, but is greater than that of the S&P 500. The net income increased by 8.1% when compared to the same quarter one year prior, going from $9.15 million to $9.90 million.
- You can view the full Tootsie Roll Industries Ratings Report.
- The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 12.2%. 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 gross profit margin for NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 68.85%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.64% is above that of the industry average.
- Net operating cash flow has significantly increased by 69.43% to $41.12 million when compared to the same quarter last year. In addition, NEW MOUNTAIN FINANCE CORP has also vastly surpassed the industry average cash flow growth rate of -183.28%.
- NEW MOUNTAIN FINANCE CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, NEW MOUNTAIN FINANCE CORP reported lower earnings of $0.56 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $0.56).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 64.9% when compared to the same quarter one year ago, falling from $22.91 million to $8.05 million.
- You can view the full New Mountain Finance Ratings Report.
- Our dividend calendar.