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."Duke Energy Dividend Yield: 4.20% Duke Energy (NYSE: DUK) shares currently have a dividend yield of 4.20%. Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States and Latin America. It operates through three segments: Regulated Utilities, International Energy, and Commercial Portfolio. The company has a P/E ratio of 20.11. The average volume for Duke Energy has been 3,003,700 shares per day over the past 30 days. Duke Energy has a market cap of $54.4 billion and is part of the utilities industry. Shares are up 10.6% year-to-date as of the close of trading on Thursday. 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 Duke Energy as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- 38.54% is the gross profit margin for DUKE ENERGY CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.34% is above that of the industry average.
- Net operating cash flow has increased to $1,664.00 million or 15.55% when compared to the same quarter last year. In addition, DUKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 8.76%.
- After a year of stock price fluctuations, the net result is that DUK'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, 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.
- DUKE ENERGY CORP's earnings per share declined by 8.3% 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, DUKE ENERGY CORP increased its bottom line by earning $4.03 versus $3.46 in the prior year. This year, the market expects an improvement in earnings ($4.60 versus $4.03).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.1%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Duke Energy Ratings Report.
- The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.26%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.84% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 480.56% to $229.62 million when compared to the same quarter last year. In addition, PROSPECT CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -198.91%.
- Despite the weak revenue results, PSEC has outperformed against the industry average of 24.5%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- PROSPECT CAPITAL CORP's earnings per share declined by 8.7% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, PROSPECT CAPITAL CORP reported lower earnings of $0.97 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.97).
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income has decreased by 7.3% when compared to the same quarter one year ago, dropping from $81.49 million to $75.51 million.
- You can view the full Prospect Capital Ratings Report.
- BUCKEYE PARTNERS LP has improved earnings per share by 14.8% 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, BUCKEYE PARTNERS LP increased its bottom line by earning $3.40 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($4.17 versus $3.40).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 17.5% when compared to the same quarter one year prior, going from $111.61 million to $131.11 million.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, BUCKEYE PARTNERS LP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The gross profit margin for BUCKEYE PARTNERS LP is currently lower than what is desirable, coming in at 33.67%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, BPL's net profit margin of 16.79% significantly outperformed against the industry.
- BPL, with its decline in revenue, slightly underperformed the industry average of 24.6%. Since the same quarter one year prior, revenues fell by 28.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Buckeye Partners Ratings Report.
- Our dividend calendar.