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 5 stocks with substantial yields, that ultimately, we have rated "Hold." BioMed Realty (NYSE: BMR) shares currently have a dividend yield of 4.20%. BioMed Realty Trust, Inc. operates as a real estate investment trust (REIT) that focuses on providing real estate to the life science industry in the United States. The company has a P/E ratio of 289.86. The average volume for BioMed Realty has been 1,826,800 shares per day over the past 30 days. BioMed Realty has a market cap of $3.8 billion and is part of the real estate industry. Shares are up 16% year to date as of the close of trading on Monday. TheStreet Ratings rates BioMed Realty as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- BMR's revenue growth has slightly outpaced the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 24.3%. 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 significantly increased by 55.55% to $62.20 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 38.55%.
- 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, BIOMED REALTY TRUST INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for BIOMED REALTY TRUST INC is currently lower than what is desirable, coming in at 25.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.90% significantly trails the industry average.
- You can view the full BioMed Realty Ratings Report.