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." Valley National Bancorp (NYSE: VLY) shares currently have a dividend yield of 7.10%. Valley National Bancorp operates as the bank holding company for the Valley National Bank that provides commercial, retail, and wealth management financial services. The company has a P/E ratio of 12.87. The average volume for Valley National Bancorp has been 1,031,500 shares per day over the past 30 days. Valley National Bancorp has a market cap of $1.8 billion and is part of the banking industry. Shares are down 2.5% year to date as of the close of trading on Thursday. TheStreet Ratings rates Valley National Bancorp as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and reasonable valuation levels. 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 unimpressive growth in net income. Highlights from the ratings report include:
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 75.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.98% is above that of the industry average.
- 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 on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- VALLEY NATIONAL BANCORP's earnings per share declined by 11.6% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, VALLEY NATIONAL BANCORP reported lower earnings of $0.74 versus $0.76 in the prior year. For the next year, the market is expecting a contraction of 17.7% in earnings ($0.61 versus $0.74).
- 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 greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 9.3% when compared to the same quarter one year ago, dropping from $34.53 million to $31.31 million.
- You can view the full Valley National Bancorp Ratings Report.