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." BCE Dividend Yield: 4.40% BCE (NYSE: BCE) shares currently have a dividend yield of 4.40%. BCE Inc. provides wireless, wireline, Internet, and television (TV) services to residential, business, and wholesale customers in Canada. The company operates through Bell Wireless, Bell Wireline, and Bell Media segments. The company has a P/E ratio of 21.58. The average volume for BCE has been 769,900 shares per day over the past 30 days. BCE has a market cap of $40.8 billion and is part of the telecommunications industry. Shares are up 18.3% 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 BCE as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, revenue growth, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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 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 Diversified Telecommunication Services industry average. The net income increased by 30.5% when compared to the same quarter one year prior, rising from $570.00 million to $744.00 million.
- BCE's revenue growth trails the industry average of 20.3%. Since the same quarter one year prior, revenues slightly increased by 0.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 49.83% is the gross profit margin for BCE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.11% is above that of the industry average.
- Net operating cash flow has increased to $1,290.00 million or 23.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -18.48%.
- You can view the full BCE Ratings Report.
- 42.27% is the gross profit margin for NUSTAR ENERGY LP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 14.14% significantly outperformed against the industry average.
- NS, with its decline in revenue, slightly underperformed the industry average of 24.5%. Since the same quarter one year prior, revenues fell by 26.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 55.1% when compared to the same quarter one year ago, falling from $127.90 million to $57.40 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NUSTAR ENERGY LP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- You can view the full NuStar Energy Ratings Report.
- The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels.
- Net operating cash flow has significantly increased by 125.83% to $271.00 million when compared to the same quarter last year. In addition, PEMBINA PIPELINE CORP has also vastly surpassed the industry average cash flow growth rate of -49.20%.
- Despite the weak revenue results, PBA has outperformed against the industry average of 24.5%. Since the same quarter one year prior, revenues fell by 11.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 15.0% when compared to the same quarter one year ago, dropping from $120.00 million to $102.00 million.
- After a year of stock price fluctuations, the net result is that PBA'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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- You can view the full Pembina Pipeline Ratings Report.
- Our dividend calendar.