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." NTELOS Holdings (NASDAQ: NTLS) shares currently have a dividend yield of 12.10%. NTELOS Holdings Corp., through its subsidiaries, provides digital wireless communications services to consumers and businesses primarily in Virginia and West Virginia, as well as parts of Maryland, North Carolina, Pennsylvania, Ohio, and Kentucky. The company has a P/E ratio of 16.20. The average volume for NTELOS Holdings has been 170,600 shares per day over the past 30 days. NTELOS Holdings has a market cap of $298.7 million and is part of the telecommunications industry. Shares are up 6.3% year to date as of the close of trading on Monday. TheStreet Ratings rates NTELOS Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins, generally higher debt management risk and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- NTLS's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues rose by 10.8%. 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 100.5% when compared to the same quarter one year prior, rising from -$60.54 million to $0.32 million.
- The debt-to-equity ratio is very high at 11.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, NTLS has managed to keep a strong quick ratio of 2.01, which demonstrates the ability to cover short-term cash needs.
- The gross profit margin for NTELOS HOLDINGS CORP is currently lower than what is desirable, coming in at 26.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.27% significantly trails the industry average.
- You can view the full NTELOS Holdings Ratings Report.