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." Pan American Silver Corporation (NASDAQ: PAAS) shares currently have a dividend yield of 4.30%. Pan American Silver Corp. engages in the exploration, development, and operation of silver producing properties and assets. It produces and sells silver, gold, copper, lead, and zinc. The company has a P/E ratio of 65.22. The average volume for Pan American Silver Corporation has been 2,049,900 shares per day over the past 30 days. Pan American Silver Corporation has a market cap of $1.8 billion and is part of the metals & mining industry. Shares are down 37.3% year to date as of the close of trading on Monday. TheStreet Ratings rates Pan American Silver Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. 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 deteriorating net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 16.1%. 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.
- PAAS's debt-to-equity ratio is very low at 0.03 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 3.43, which clearly demonstrates the ability to cover short-term cash needs.
- 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. When compared to other companies in the Metals & Mining industry and the overall market, PAN AMERICAN SILVER CORP's return on equity is below that of both the industry average and the S&P 500.
- PAN AMERICAN SILVER CORP 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. During the past fiscal year, PAN AMERICAN SILVER CORP reported lower earnings of $0.61 versus $3.01 in the prior year.
- 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 Metals & Mining industry. The net income has significantly decreased by 130.5% when compared to the same quarter one year ago, falling from $95.36 million to -$29.06 million.
- You can view the full Pan American Silver Corporation Ratings Report.