Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."VimpelCom (NYSE: VIP) shares currently have a dividend yield of 13.10%. VimpelCom Ltd., a telecommunications service operator, provides voice and data services through a range of traditional and broadband mobile and fixed technologies. The company has a P/E ratio of 8.12. The average volume for VimpelCom has been 1,474,200 shares per day over the past 30 days. VimpelCom has a market cap of $17.5 billion and is part of the telecommunications industry. Shares are up 2% year to date as of the close of trading on Friday. TheStreet Ratings rates VimpelCom as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet. Highlights from the ratings report include:
- 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 305.3% when compared to the same quarter one year prior, rising from -$390.19 million to $801.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 0.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market on the basis of return on equity, VIMPELCOM LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- VIMPELCOM LTD 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, VIMPELCOM LTD increased its bottom line by earning $1.32 versus $0.45 in the prior year. For the next year, the market is expecting a contraction of 6.8% in earnings ($1.23 versus $1.32).
- Currently the debt-to-equity ratio of 1.72 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, VIP has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full VimpelCom Ratings Report.
- The revenue fell significantly faster than the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 42.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- NS's debt-to-equity ratio of 0.96 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.
- NUSTAR ENERGY LP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NUSTAR ENERGY LP swung to a loss, reporting -$2.95 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($1.91 versus -$2.95).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 7.4% when compared to the same quarter one year ago, dropping from $26.35 million to $24.40 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 Oil, Gas & Consumable Fuels industry and the overall market, NUSTAR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full NuStar Energy L.P Ratings Report.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Services & Supplies industry and the overall market, PITNEY BOWES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PITNEY BOWES INC is rather high; currently it is at 55.10%. Regardless of PBI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PBI's net profit margin of 5.78% compares favorably to the industry average.
- The share price of PITNEY BOWES INC has not done very well: it is down 15.41% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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 Commercial Services & Supplies industry. The net income has significantly decreased by 57.5% when compared to the same quarter one year ago, falling from $158.67 million to $67.51 million.
- You can view the full Pitney Bowes Ratings Report.
- RY's revenue growth has slightly outpaced the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 1.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market, ROYAL BANK OF CANADA's return on equity exceeds that of both the industry average and the S&P 500.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Net operating cash flow has significantly decreased to -$3,397.00 million or 376.62% 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 Royal Bank Of Canada Ratings Report.
- Our dividend calendar.