5 Interesting Stocks With Yields As High As 15%

|
 |  Includes: BPL, CYS, IRET, SID, VALE
by: Tactical Investor

We have posted several key ratios on each of the five stocks covered in this article and are going to provide an explanation for some of these ratios below because we believe that they could prove to be useful in the selection process. If these ratios are utilized properly they could help one identify potential winners and prevent one from getting into a dud.

Free cash flow yield is obtained by dividing free cash flow per share by the current price of each share. Generally lower ratios are associated with an unattractive investment and vice versa. Free cash flow takes into account capital expenditures and other ongoing costs associated with the day to day to functions of the business. In our view free cash flow yield is a better valuation metric then earnings yield because of the above factor

Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa.

Operating cash flow is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt; the cash flow is what pays the bills.

The payout ratio tells us what portion of the profit is being returned to investors. A pay out ratio over 100% indicates that the company is paying out more money to shareholders, then they are making; this situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for sometime. If the payout ratio continues to increase, the situation warrants close monitoring as this cannot last forever; if your tolerance for risk is a low, look for similar companies with the same or higher yields, but with lower payout ratios. Individuals searching for other ideas might find this article to be of interest 5 Plays With Stellar Payment Histories

Quick ratio or acid -test is obtained by adding cash and cash equivalents plus marketable securities and accounts receivable dividing them by current liabilities. It is a measure of a company's ability to use its quick assets (assets that can be sold of immediately at close to book value) to pay off its current liabilities immediately. A company with a quick ratio of less than 1 cannot pay back its current liabilities.

Price to tangible book is obtained by dividing share price by tangible book value per share. The ratio gives investors some idea of whether they are paying too much for what would be left over if the company were to declare bankruptcy immediately. In general stocks that trade at higher price to tangible book value could leave investors facing a great percentage per share loss than those that trade at lower ratios. The price to tangible book value is theoretically the lowest possible price the stock would trade to.

Interest coverage is usually calculated by dividing the earnings before interest and taxes for a period of 1 year by the interest expenses for the same time period. This ratio informs you of a company's ability to make its interest payments on its outstanding debt. Lower interest coverage ratios indicate that there is a larger debt burden on the company and vice versa. Additional key metrics are addressed in this article Dividend Champs With Tempting Yields As High As 8.3%

Our favourtie play on the list is Vale S. A. (NYSE:VALE) and we like it for the following reasons

5 year dividend growth rate of=24.2%

5 year dividend average of=2.5%

ROE=29%

Levered free cash flow rate is at a very strong and healthy $8.5 billion

Interest coverage ratio of= 5.9%

Quick ratio of =1.5%

Total 3 year return= 92%

Click to enlarge

Important facts investors should be aware in regards to investing in MLPs and REITS

  1. Payout ratios are not that important when it comes to MLPS/REITS as they are required by law to pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the dividend/distribution rate by the net income per share, and this is why the payout ratio for MLPs and REITS is often higher than 100%. The more important ratio to focus on is the cash flow per unit. If one focuses on the cash flow per unit, one will see that in most cases, it exceeds the distribution/dividend declared per unit/share.
  2. MLPs are not taxed like regular corporations because they pay out a large portion of their income to partners (as an investor you are basically a partner and are allocated units instead of shares) usually through quarterly distributions. The burden is thus shifted to the partners who are taxed at their ordinary income rates. As ordinary income tax rates of investors are typically lower than the income tax assessed on corporations, this arrangement is advantageous to the MLPs and generally most investors.
  3. MLPs issue a Schedule K-1 to their investors. Unrelated business income (UBI) above $1,000 is taxable in an IRA. This information will appear in Box 20 in the schedule K-1. UBI is typically a very small number; usually well below $1000 and in some cases negative. If the MLP pays out distributions in excess of the income it generates, the distribution is classified as a "return of capital" and tax deferred until you sell your units. For more information, on this topic investors can visit the National Association of Publicly Traded Partnerships.

Stock

Dividend Yield

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

CYS

15.00%

1.12B

6.60

263M

293.30%

0.19

182.06M

-6.34B

BPL

6.50%

5.83B

18.03

427.56M

52.00%

0.24

4.46B

178.43M

IRET

8.10%

633.80M

11.25

130.17M

3.10%

0.41

239.69M

64.40M

SID

7.40%

14.97B

5.9

3.61B

7.40%

1.79

9.07B

1.66B

VALE

6.50%

130.02B

6.42

34.08B

9.10%

1.57

58.90B

24.05B

Click to enlarge

CYS Investments, Inc. (NYSE:CYS)

Industry : REITs

Net income for the past three years

2008 = $-34.45 million

2009 = $63.85 million

2010 = $22.39 million

2011= it stands at $249 million and could come in as high as $345 million

Total cash flow from operating activities

2008 = $752.72 million

2009 = $-880.74 million

2010 = $-2483.4 million

Key Ratios

P/E Ratio = 6.4

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 3.86

Price to Book = 1.03

Price to Tangible Book = 1.03

Price to Cash Flow = 4.8

Price to Free Cash Flow = -0.2

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0

Total Debt to Equity = 0

Interest Coverage = 17.2

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 28.22%

Return on Assets = 3.23%

200 day moving average = 12.88

Current Ratio = 0.01

Total debt = 7.64B

Book value = 12.98

Dividend yield 5 year average = 0%

Dividend rate = $ 2.25

Payout ratio = 181%

Dividend growth rate 3 year avg = 0%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2009

Warnings

Operating income has been declining for the past two years and is on course to remain negative in 2011. This suggests that CYS is going to have problems making dividend payments unless this situation changes. The dividend was cut from 55 cents to 50 cents.

Buckeye Partners, L.P. (NYSE:BPL)

Industry : Equipment & Services

Net income for the past three years

2008 = $184.39 million

2009 = $49.6 million

2010 = $43.08 million

Total cash flow from operating activities

2008 = $215.26 million

2009 = $47.67 million

2010 = $292.48 million

Key Ratios

P/E Ratio = N.A.

P/E High - Last 5 Yrs = 43.4

P/E Low - Last 5 Yrs = 7

Price to Sales = 1.3

Price to Book = 2.47

Price to Tangible Book = 4.34

Price to Cash Flow = 84.5

Price to Free Cash Flow = -3.9

Quick Ratio = 0.3

Current Ratio = 1.2

LT Debt to Equity = 0.99

Total Debt to Equity = 1.13

Interest Coverage = 0.4

Inventory Turnover = 12.1

Asset Turnover = 1

ROE = 5.06%

Return on Assets = 4.74%

200 day moving average = 63.39

Current Ratio = 1.15

Total debt = 2.75B

Book value = 25.2

Qtrly Earnings Growth = N/A

Dividend yield 5 year average = 6.8%

Dividend rate = $ 4.03

Payout ratio = 209.00%

Dividend growth rate 3 year avg = 5.53%

Dividend growth rate 5 year avg = 5.58%

Consecutive dividend increases = 16 years

Paying dividends since = 1990

Total return last 3 years = 83.95%

Total return last 5 years = 53.72%

Positive factors

Dividend was increased from 1.0125 to 1.025. Dividend has been increased consecutively for 16 years in a row.

Investors Real Estate Trust (NYSE:IRET)

Industry : REITs

Net income for the past three years

2009 = $8.53 million

2010 = $4.01 million

2011 = $20.09 million

Total cash flow from operating activities

2009 = $60.14 million

2010 = $61.42 million

2011 = $58.78 million

Key Ratios

P/E Ratio = 49.5

P/E High - Last 5 Yrs = 326.7

P/E Low - Last 5 Yrs = 36.2

Price to Sales = 2.6

Price to Book = 1.63

Price to Tangible Book = 1.88

Price to Cash Flow = 40

Price to Free Cash Flow = -6.5

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 2.72

Total Debt to Equity = 2.84

Interest Coverage = 1.1

Inventory Turnover = N.A.

Asset Turnover = 0.1

ROE = 0.61%

Return on Assets = 2.64%

200 day moving average = 7.43

Current Ratio = 1.19

Total debt = 1.09B

Book value = 4.57

Qtrly Earnings Growth = -77.9%

Dividend yield 5 year average = 7.4%

Dividend rate = $ 0.60

Payout ratio = 430%

Dividend growth rate 3 year avg = -3.49%

Dividend growth rate 5 year avg = 2.68%

Consecutive dividend increases = 0 years

Paying dividends since = 1997

Total return last 3 years = -5.61%

Total return last 5 years = 3.61%

Warning

It has a negative 3 and 5 year dividend growth rate. The total returns for the past 3 and 5 years are also negative. Additionally, the quarterly earnings growth rate has taken a big hit.

Companhia Siderurgica Nacional (NYSE:SID)

Industry : Non-Precious Metals

Net income for the past three years

2008 = $2.66 billion

2009 = $1.51 billion

2010 = $1.52 billion

Total cash flow from operating activities

2008 = $2.07 billion

2009 = $-443.45 million

2010 = $1.5 billion

Key Ratios

P/E Ratio = 4.7

P/E High - Last 5 Yrs = 22.2

P/E Low - Last 5 Yrs = 2.3

Price to Sales = 1.34

Price to Book = 3.37

Price to Tangible Book = 3.61

Price to Cash Flow = 6.1

Price to Free Cash Flow = -8.8

Quick Ratio = 3.6

Current Ratio = 4.5

LT Debt to Equity = 3.05

Total Debt to Equity = 3.33

Interest Coverage = 3.6

Inventory Turnover = 2.9

Asset Turnover = 0.5

ROE = 40.16%

Return on Assets = 8.25%

200 day moving average = 9.03

Current Ratio = 4.46

Total debt = 15.91B

Book value = 3.28

Qtrly Earnings Growth = 51.6%

Dividend yield 5 year average = 5.9%

Dividend rate = $ 0.64

Payout ratio = 35%

Dividend growth rate 3 year avg = -1.94%

Dividend growth rate 5 year avg = 8.23%

Consecutive dividend increases = 2 years

Paying dividends since = 1997

Total return last 3 years = 63.98%

Total return last 5 years = 166.3%

Warning

The dividend could be cut as total cash flows from operating activities and net income levels have been dropping.

Vale S. A. (VALE)

Industry: Non-Precious Metals

It has a very strong levered free cash flow rate of $8.45 billion and a current ratio of 2.15. It also sports a high beta which makes it a very good candidate for covered writes.

Net income for the past three years

2008 = $13.22 billion

2009 = $5.35 billion

2010 = $17.27 billion

Total cash flow from operating activities

2008 = $17.12 billion

2009 = $7.14 billion

2010 = $19.67 billion

Key Ratios

P/E Ratio = 5

P/E High - Last 5 Yrs = 30.9

P/E Low - Last 5 Yrs = 3.4

Price to Sales = 2.28

Price to Book = 2.21

Price to Tangible Book = 2.66

Price to Cash Flow = 4.9

Price to Free Cash Flow = 63.9

Quick Ratio = 1.5

Current Ratio = 2.1

LT Debt to Equity = 0.4

Total Debt to Equity = 0.43

Interest Coverage = 5.9

Inventory Turnover = 4

Asset Turnover = 0.5

ROE = 29.63%

Return on Assets = 14.55%

200 day moving average = 25.33

Current Ratio = 2.15

Total debt = 28.32B

Book value = 15.76

Qtrly Earnings Growth = -25.2%

Dividend yield 5 year average = 2.5%

Dividend rate = $ 0.03

Payout ratio = 23%

Dividend growth rate 3 year avg = 63.3%

Dividend growth rate 5 year avg = 24.26%

Consecutive dividend increases = 2 years

Paying dividends since = 2002

Total return last 3 years = 92.95%

Total return last 5 years = 72.17%

Notes

Brazil's Vale has proposed a 50 per cent increase in its minimum dividend pay-out this year in a move that will raise investor confidence in the world's second-biggest miner by volumes.Vale said it would distribute at least $6bn to shareholders, or about $1.18 per share, in two instalments in April and October, compared with the $4bn minimum pay-out initially proposed for 2011.

VALE's dividend payments for 2011. This data was extracted from VALE's website.

Click to enlarge

ISE = interest on shareholders' equity

Growth of $10,000 graphs sourced from Morningstar.com. Dividend history charts sourced from dividata.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is very important that you check the finer details, do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.