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." Barrick Gold Corporation (NYSE: ABX) shares currently have a dividend yield of 4.20%. Barrick Gold Corporation engages in the production and sale of gold and copper. It is also involved in exploration and mine development activities. The average volume for Barrick Gold Corporation has been 12,990,800 shares per day over the past 30 days. Barrick Gold Corporation has a market cap of $18.9 billion and is part of the metals & mining industry. Shares are down 49.6% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Barrick Gold Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 11.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $1,672.00 million or 28.51% when compared to the same quarter last year. In addition, BARRICK GOLD CORP has also vastly surpassed the industry average cash flow growth rate of -48.21%.
- ABX's debt-to-equity ratio of 0.64 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that ABX's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.63 is low and demonstrates weak liquidity.
- 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 Metals & Mining industry. The net income has significantly decreased by 419.3% when compared to the same quarter one year ago, falling from $959.00 million to -$3,062.00 million.
- 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 Metals & Mining industry and the overall market on the basis of return on equity, BARRICK GOLD CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Barrick Gold Corporation Ratings Report.