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." China Ceramics (NASDAQ: CCCL) shares currently have a dividend yield of 9.30%. China Ceramics Co., Ltd. engages in the manufacture and sale of ceramic tiles for exterior siding and interior flooring, and design in residential and commercial buildings in the People's Republic of China and internationally. The company has a P/E ratio of 1.12. The average volume for China Ceramics has been 89,800 shares per day over the past 30 days. China Ceramics has a market cap of $43.7 million and is part of the materials & construction industry. Shares are down 1.9% year to date as of the close of trading on Wednesday. TheStreet Ratings rates China Ceramics as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and notable return on equity. 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 poor profit margins. Highlights from the ratings report include:
- CCCL's debt-to-equity ratio is very low at 0.04 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 3.08, which clearly demonstrates the ability to cover short-term cash needs.
- The revenue fell significantly faster than the industry average of 5.4%. Since the same quarter one year prior, revenues fell by 38.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for CHINA CERAMICS CO LTD is rather low; currently it is at 19.50%. It has decreased significantly from the same period last year.
- Net operating cash flow has significantly decreased to -$4.94 million or 145.63% 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 China Ceramics Ratings Report.