Top 3 Yielding Buy-Rated Stocks: ETR, MPW, CHSP

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

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: 4.30%

Entergy (NYSE: ETR) shares currently have a dividend yield of 4.30%.

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 14.61.

The average volume for Entergy has been 1,449,600 shares per day over the past 30 days. Entergy has a market cap of $14.3 billion and is part of the utilities industry. Shares are up 17.4% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Entergy as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and solid stock price performance. 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.
  • 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, despite the company's weak earnings results. 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.
  • 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 ($5.06 versus -$1.00).
  • ETR, with its decline in revenue, slightly underperformed the industry average of 7.5%. 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.
  • Currently the debt-to-equity ratio of 1.56 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.

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Medical Properties

Dividend Yield: 6.10%

Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.10%.

Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 21.49.

The average volume for Medical Properties has been 2,913,500 shares per day over the past 30 days. Medical Properties has a market cap of $3.6 billion and is part of the real estate industry. Shares are up 31% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Medical Properties as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and attractive valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

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 35.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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.
  • MEDICAL PROPERTIES TRUST has improved earnings per share by 41.2% 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, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.62 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.99 versus $0.62).
  • 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 61.4% when compared to the same quarter one year prior, rising from $35.90 million to $57.93 million.

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Chesapeake Lodging

Dividend Yield: 6.60%

Chesapeake Lodging (NYSE: CHSP) shares currently have a dividend yield of 6.60%.

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 21.13.

The average volume for Chesapeake Lodging has been 379,300 shares per day over the past 30 days. Chesapeake Lodging has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 1.8% year-to-date as of the close of trading on Friday.

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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 11.78%.
  • 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 ($1.35 versus $0.97).

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