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." VimpelCom (NYSE: VIP) shares currently have a dividend yield of 12.40%. 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 8.52. The average volume for VimpelCom has been 1,528,200 shares per day over the past 30 days. VimpelCom has a market cap of $18.3 billion and is part of the telecommunications industry. Shares are up 7.8% year to date as of the close of trading on Tuesday. 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.
- ARCP's very impressive revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues leaped by 544.2%. 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.
- Compared to its closing price of one year ago, ARCP's share price has jumped by 56.81%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- AMERICAN RLTY CAP PPTY INC 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERICAN RLTY CAP PPTY INC reported poor results of -$0.89 versus -$0.24 in the prior year. This year, the market expects an improvement in earnings (-$0.75 versus -$0.89).
- 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, AMERICAN RLTY CAP PPTY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$6.77 million or 847.68% 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 American Realty Capital Properties 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. In comparison to the other companies in the Commercial Banks industry and the overall market, CANADIAN IMPERIAL BANK's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The gross profit margin for CANADIAN IMPERIAL BANK is currently very high, coming in at 76.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.68% is above that of the industry average.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- Net operating cash flow has decreased to $1,455.00 million or 39.07% when compared to the same quarter last year. Despite a decrease in cash flow of 39.07%, CANADIAN IMPERIAL BANK is still significantly exceeding the industry average of -93.91%.
- 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 Commercial Banks industry average. The net income has decreased by 4.3% when compared to the same quarter one year ago, dropping from $832.00 million to $796.00 million.
- You can view the full Canadian Imperial Bank of Commerce Ratings Report.
- Our dividend calendar.