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."Lamar Advertising Dividend Yield: 4.50% Lamar Advertising (NASDAQ: LAMR) shares currently have a dividend yield of 4.50%. Lamar Advertising Company is a publicly owned equity real estate investment trust. The firm primarily engages in selling advertising space on billboards, buses, shelters, benches, and logo plates. Lamar Advertising Company was founded in 1902 and is headquartered in Baton Rouge, Louisiana. The company has a P/E ratio of 23.47. The average volume for Lamar Advertising has been 509,000 shares per day over the past 30 days. Lamar Advertising has a market cap of $6.5 billion and is part of the real estate industry. Shares are up 10.6% 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 Lamar Advertising as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- LAMR's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 11.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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.
- LAMAR ADVERTISING CO has improved earnings per share by 26.2% 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, LAMAR ADVERTISING CO increased its bottom line by earning $2.71 versus $2.66 in the prior year. This year, the market expects an improvement in earnings ($3.09 versus $2.71).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 26.0% when compared to the same quarter one year prior, rising from $40.72 million to $51.31 million.
- The gross profit margin for LAMAR ADVERTISING CO is rather high; currently it is at 62.29%. Regardless of LAMR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LAMR's net profit margin of 15.15% is significantly lower than the industry average.
- You can view the full Lamar Advertising Ratings Report.
- Compared to its closing price of one year ago, SO's share price has jumped by 27.99%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- 38.59% is the gross profit margin for SOUTHERN CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.50% is above that of 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. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, SOUTHERN CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- SOUTHERN CO's earnings per share declined by 5.3% 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, SOUTHERN CO increased its bottom line by earning $2.60 versus $2.18 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $2.60).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.6%. Since the same quarter one year prior, revenues slightly dropped by 5.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Southern Ratings Report.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Gas Utilities industry and the overall market, AMERIGAS 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 AMERIGAS PARTNERS -LP is rather high; currently it is at 68.58%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.71% significantly outperformed against the industry average.
- AMERIGAS PARTNERS -LP's earnings per share declined by 19.8% 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, AMERIGAS PARTNERS -LP reported lower earnings of $0.69 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $0.69).
- APU, with its decline in revenue, slightly underperformed the industry average of 19.9%. Since the same quarter one year prior, revenues fell by 24.8%. 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 APU'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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full AmeriGas Partners Ratings Report.
- Our dividend calendar.