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." BGC Partners (NASDAQ: BGCP) shares currently have a dividend yield of 10.90%. BGC Partners, Inc. operates as a brokerage company, primarily servicing the wholesale financial markets. The company has a P/E ratio of 27.50. Currently there are 2 analysts that rate BGC Partners a buy, 1 analyst rates it a sell, and 1 rates it a hold. The average volume for BGC Partners has been 1,596,800 shares per day over the past 30 days. BGC Partners has a market cap of $568.6 million and is part of the financial services industry. Shares are up 23% year to date as of the close of trading on Thursday. TheStreet Ratings rates BGC Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 21.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 Capital Markets industry. The net income increased by 268.9% when compared to the same quarter one year prior, rising from $3.84 million to $14.17 million.
- BGC PARTNERS INC 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, BGC PARTNERS INC reported lower earnings of $0.16 versus $0.19 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus $0.16).
- The gross profit margin for BGC PARTNERS INC is currently extremely low, coming in at 1.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.29% significantly trails the industry average.
- BGCP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.82%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, BGCP is still more expensive than most of the other companies in its industry.
- You can view the full BGC Partners Ratings Report.