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 4 stocks with substantial yields, that ultimately, we have rated "Hold."CenturyLink (NYSE: CTL) shares currently have a dividend yield of 6.20%. CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The company has a P/E ratio of 22.93. Currently there are 8 analysts that rate CenturyLink a buy, 3 analysts rate it a sell, and 7 rate it a hold. The average volume for CenturyLink has been 7,708,900 shares per day over the past 30 days. CenturyLink has a market cap of $21.8 billion and is part of the telecommunications industry. Shares are down 10.1% year to date as of the close of trading on Tuesday. TheStreet Ratings rates CenturyLink as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 117.8% when compared to the same quarter one year prior, rising from $107.00 million to $233.00 million.
- CENTURYLINK 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, CENTURYLINK INC reported lower earnings of $1.24 versus $1.29 in the prior year. This year, the market expects an improvement in earnings ($2.67 versus $1.24).
- CTL has underperformed the S&P 500 Index, declining 9.11% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The debt-to-equity ratio of 1.07 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.47, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full CenturyLink Ratings Report.
- CY, with its decline in revenue, underperformed when compared the industry average of 12.8%. Since the same quarter one year prior, revenues fell by 25.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for CYPRESS SEMICONDUCTOR CORP is rather high; currently it is at 52.90%. Regardless of CY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CY's net profit margin of -12.32% significantly underperformed when compared to the industry average.
- CYPRESS SEMICONDUCTOR CORP 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CYPRESS SEMICONDUCTOR CORP swung to a loss, reporting -$0.16 versus $0.89 in the prior year. This year, the market expects an improvement in earnings ($0.49 versus -$0.16).
- The debt-to-equity ratio of 1.44 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CY has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, CYPRESS SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Cypress Semiconductor Corporation Ratings Report.
- WASHINGTON REIT 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, WASHINGTON REIT turned its bottom line around by earning $0.27 versus -$0.06 in the prior year.
- WRE's revenue growth trails the industry average of 16.4%. Since the same quarter one year prior, revenues slightly increased by 2.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $38.34 million or 21.83% when compared to the same quarter last year. Despite an increase in cash flow, WASHINGTON REIT's cash flow growth rate is still lower than the industry average growth rate of 38.95%.
- 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 90.3% when compared to the same quarter one year ago, falling from $30.38 million to $2.94 million.
- WRE has underperformed the S&P 500 Index, declining 5.92% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Washington REIT Ratings Report.
- The revenue growth came in higher than the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 45.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has increased to $126.14 million or 20.79% when compared to the same quarter last year. Despite an increase in cash flow, HATTERAS FINANCIAL CORP's cash flow growth rate is still lower than the industry average growth rate of 38.95%.
- In its most recent trading session, HTS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, HATTERAS FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Hatteras Financial Corporation Ratings Report.
- Our dividend calendar.