Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.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 and 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 "Hold."Valley National Bancorp (NYSE:VLY) shares currently have a dividend yield of 7.20%. Valley National Bancorp operates as the bank holding company for the Valley National Bank that provides commercial, retail, and wealth management financial services. The company has a P/E ratio of 12.75.The average volume for Valley National Bancorp has been 1,074,500 shares per day over the past 30 days. Valley National Bancorp has a market cap of $1.8 billion and is part of the banking industry. Shares are down 3.9% year to date as of the close of trading on Friday.TheStreet Ratings rates Valley National Bancorp as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and weak operating cash flow.Highlights from the ratings report include:
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 75.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VLY's net profit margin of 16.98% significantly trails 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 Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 9.3% when compared to the same quarter one year ago, dropping from $34.53 million to $31.31 million.
- Net operating cash flow has significantly decreased to $40.34 million or 71.47% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Valley National Bancorp Ratings Report.
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