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." CommonWealth REIT (NYSE: CWH) shares currently have a dividend yield of 4.40%. CommonWealth REIT is a real estate investment trust launched and managed by Reit Management & Research LLC. The fund invests in the real estate markets of the United States. It seeks to invest in office buildings, industrial buildings, and leased industrial land. The company has a P/E ratio of 64.80. Currently there are no analysts that rate CommonWealth REIT a buy, 1 analyst rates it a sell, and 1 rates it a hold. The average volume for CommonWealth REIT has been 3,562,100 shares per day over the past 30 days. CommonWealth REIT has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 42.4% year to date as of the close of trading on Tuesday. TheStreet Ratings rates CommonWealth REIT as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and poor profit margins. Highlights from the ratings report include:
- This stock has managed to rise its share value by 22.17% over the past twelve months. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- COMMONWEALTH REIT has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, COMMONWEALTH REIT increased its bottom line by earning $0.36 versus $0.19 in the prior year.
- The gross profit margin for COMMONWEALTH REIT is currently lower than what is desirable, coming in at 33.30%. Regardless of CWH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CWH's net profit margin of -57.04% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 1127.3% when compared to the same quarter one year ago, falling from $14.87 million to -$152.78 million.
- You can view the full CommonWealth REIT Ratings Report.
- NCT's revenue growth has slightly outpaced the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 19.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 77.77% and other important driving factors, this stock has surged by 57.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEWCASTLE INVESTMENT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- NEWCASTLE INVESTMENT CORP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NEWCASTLE INVESTMENT CORP reported lower earnings of $2.84 versus $3.49 in the prior year. For the next year, the market is expecting a contraction of 61.1% in earnings ($1.11 versus $2.84).
- You can view the full Newcastle Investment Corporation Ratings Report.
- 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. In comparison to the other companies in the Commercial Banks industry and the overall market, CANADIAN IMPERIAL BANK's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The gross profit margin for CANADIAN IMPERIAL BANK is currently very high, coming in at 76.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.68% is above that of the industry average.
- CANADIAN IMPERIAL BANK' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, CANADIAN IMPERIAL BANK increased its bottom line by earning $7.85 versus $7.30 in the prior year.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Commercial Banks industry average, but is greater than that of the S&P 500. The net income has decreased by 4.3% when compared to the same quarter one year ago, dropping from $832.00 million to $796.00 million.
- Net operating cash flow has decreased to $1,455.00 million or 39.07% 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 Canadian Imperial Bank of Commerce Ratings Report.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- STM's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
- 47.40% is the gross profit margin for STMICROELECTRONICS NV which we consider to be strong. Regardless of STM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STM's net profit margin of -3.50% significantly underperformed when compared to the industry average.
- STMICROELECTRONICS NV has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, STMICROELECTRONICS NV reported lower earnings of $0.72 versus $0.91 in the prior year. For the next year, the market is expecting a contraction of 111.1% in earnings (-$0.08 versus $0.72).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 118.1% when compared to the same quarter one year ago, falling from $420.00 million to -$76.00 million.
- You can view the full STMicroelectronics Ratings Report.
- Our dividend calendar.