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 3 stocks with substantial yields, that ultimately, we have rated "Hold."Gladstone Commercial Corporation (NASDAQ: GOOD) shares currently have a dividend yield of 7.30%. Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans. The average volume for Gladstone Commercial Corporation has been 79,300 shares per day over the past 30 days. Gladstone Commercial Corporation has a market cap of $235.7 million and is part of the real estate industry. Shares are up 14.9% year to date as of the close of trading on Friday. TheStreet Ratings rates Gladstone Commercial Corporation as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and expanding profit margins. 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 disappointing return on equity. Highlights from the ratings report include:
- GOOD's revenue growth has slightly outpaced the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 16.0%. 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 where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- 48.20% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 3.08% is significantly lower than the industry average.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 66.7% when compared to the same quarter one year ago, falling from $1.30 million to $0.43 million.
- 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 on the basis of return on equity, GLADSTONE COMMERCIAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Gladstone Commercial Corporation Ratings Report.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.8%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.56, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.92 is weak.
- The gross profit margin for RHINO RESOURCE PARTNERS LP is currently lower than what is desirable, coming in at 27.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.23% trails that of the industry average.
- Net operating cash flow has decreased to $10.60 million or 37.85% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Rhino Resource Partners Ratings Report.
- The revenue growth came in higher than the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 27.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, DYNEX CAPITAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of 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. 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.
- DYNEX CAPITAL INC's earnings per share improvement from the most recent quarter was slightly positive. 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, DYNEX CAPITAL INC increased its bottom line by earning $1.36 versus $1.05 in the prior year. For the next year, the market is expecting a contraction of 4.4% in earnings ($1.30 versus $1.36).
- You can view the full Dynex Capital Ratings Report.
- Our dividend calendar.