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 company has a P/E ratio of 13.50. The average volume for Entergy has been 1,509,300 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 8.4% 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 Entergy as a buy. Among the primary strengths of the company is its expanding profit margins over time. We feel its strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- 35.29% is the gross profit margin for ENTERGY CORP which we consider to be strong. 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 9.01% trails the industry average.
- ENTERGY CORP's earnings per share declined by 22.4% 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 ($5.07 versus -$1.00).
- ETR, with its decline in revenue, slightly underperformed the industry average of 7.8%. Since the same quarter one year prior, revenues fell by 10.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- After a year of stock price fluctuations, the net result is that ETR's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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 decreased to $532.82 million or 12.78% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Entergy Ratings Report.
- The revenue growth came in higher than the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 23.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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. 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.
- The gross profit margin for LTC PROPERTIES INC is currently very high, coming in at 77.98%. Regardless of LTC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LTC's net profit margin of 51.08% significantly outperformed against the industry.
- Net operating cash flow has slightly increased to $19.61 million or 9.74% when compared to the same quarter last year. Despite an increase in cash flow, LTC PROPERTIES INC's average is still marginally south of the industry average growth rate of 11.09%.
- LTC PROPERTIES INC has improved earnings per share by 12.8% 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, LTC PROPERTIES INC reported lower earnings of $1.95 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $1.95).
- You can view the full LTC Properties Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 3.9% when compared to the same quarter one year prior, going from $636.10 million to $661.20 million.
- ENTERPRISE PRODS PRTNRS -LP reported flat earnings per share in the most recent quarter. 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, ENTERPRISE PRODS PRTNRS -LP reported lower earnings of $1.26 versus $1.48 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus $1.26).
- EPD, with its decline in revenue, slightly underperformed the industry average of 24.5%. Since the same quarter one year prior, revenues fell by 33.0%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- The gross profit margin for ENTERPRISE PRODS PRTNRS -LP is rather low; currently it is at 24.31%. Regardless of EPD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, EPD's net profit margin of 13.20% significantly outperformed against the industry.
- You can view the full Enterprise Products Partners Ratings Report.
- Our dividend calendar.