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 "Hold." Thomson Reuters Corporation (NYSE: TRI) shares currently have a dividend yield of 4.10%. Thomson Reuters Corporation provides intelligent information for businesses and professionals worldwide. It sells electronic content and services to professionals, primarily on a subscription basis. The company has a P/E ratio of 12.84. Currently there are 3 analysts that rate Thomson Reuters Corporation a buy, 2 analysts rate it a sell, and 9 rate it a hold. The average volume for Thomson Reuters Corporation has been 979,700 shares per day over the past 30 days. Thomson Reuters Corporation has a market cap of $26.4 billion and is part of the computer software & services industry. Shares are up 9.9% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Thomson Reuters Corporation as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- THOMSON-REUTERS CORP reported significant earnings per share improvement 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. During the past fiscal year, THOMSON-REUTERS CORP turned its bottom line around by earning $2.49 versus -$1.70 in the prior year.
- The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that TRI's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
- 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. When compared to other companies in the Media industry and the overall market, THOMSON-REUTERS CORP's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for THOMSON-REUTERS CORP is currently lower than what is desirable, coming in at 27.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 10.94% trails that of the industry average.
- You can view the full Thomson Reuters Corporation Ratings Report.