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 4 stocks with substantial yields, that ultimately, we have rated "Sell." Oaktree Capital Group (NYSE: OAK) shares currently have a dividend yield of 10.60%. Oaktree Capital Group, LLC operates as a global investment management firm that focuses on alternative markets. The company has a P/E ratio of 10.30. The average volume for Oaktree Capital Group has been 401,200 shares per day over the past 30 days. Oaktree Capital Group has a market cap of $1.6 billion and is part of the financial services industry. Shares are up 18.7% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Oaktree Capital Group as a sell. The area that we feel has been the company's primary weakness has been its declining revenues. Highlights from the ratings report include:
- OAK, with its decline in revenue, underperformed when compared the industry average of 5.9%. Since the same quarter one year prior, revenues fell by 20.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 40.62% is the gross profit margin for OAKTREE CAPITAL GROUP LLC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.48% trails the industry average.
- Net operating cash flow has increased to $2,257.11 million or 11.23% when compared to the same quarter last year. In addition, OAKTREE CAPITAL GROUP LLC has also vastly surpassed the industry average cash flow growth rate of -283.76%.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, OAKTREE CAPITAL GROUP LLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- This stock has increased by 41.79% over the past year, outperforming the rise in the S&P 500 Index during the same period. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.
- You can view the full Oaktree Capital Group Ratings Report.
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