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 3 stocks with substantial yields, that ultimately, we have rated "Hold." Pan American Silver Corporation (NASDAQ: PAAS) shares currently have a dividend yield of 4.20%. Pan American Silver Corp. engages in the exploration, development, and operation of silver producing properties and assets. It produces and sells silver, gold, copper, lead, and zinc. The company has a P/E ratio of 21.67. The average volume for Pan American Silver Corporation has been 1,689,500 shares per day over the past 30 days. Pan American Silver Corporation has a market cap of $1.8 billion and is part of the metals & mining industry. Shares are down 36.4% year to date as of the close of trading on Thursday. TheStreet Ratings rates Pan American Silver Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 16.1%. 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.
- PAAS's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.43, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has decreased to $81.60 million or 22.25% when compared to the same quarter last year. Despite a decrease in cash flow PAN AMERICAN SILVER CORP is still fairing well by exceeding its industry average cash flow growth rate of -48.78%.
- 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. When compared to other companies in the Metals & Mining industry and the overall market, PAN AMERICAN SILVER CORP's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for PAN AMERICAN SILVER CORP is currently extremely low, coming in at 7.40%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -11.73% is significantly below that of the industry average.
- You can view the full Pan American Silver Corporation Ratings Report.
- NEWMONT MINING 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NEWMONT MINING CORP increased its bottom line by earning $3.78 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($3.87 versus $3.78).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 165.5% when compared to the same quarter one year prior, rising from -$1,028.00 million to $673.00 million.
- NEM, with its decline in revenue, slightly underperformed the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 10.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has declined marginally to $842.00 million or 8.67% when compared to the same quarter last year. Despite a decrease in cash flow NEWMONT MINING CORP is still fairing well by exceeding its industry average cash flow growth rate of -48.78%.
- NEM has underperformed the S&P 500 Index, declining 19.48% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full Newmont Mining Corporation Ratings Report.
- TWO's very impressive revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues leaped by 255.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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.
- TWO HARBORS 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TWO HARBORS INVESTMENT CORP reported lower earnings of $1.11 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $1.11).
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, TWO HARBORS INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $0.14 million or 99.77% 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 Two Harbors Investment Ratings Report.
- Our dividend calendar.