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." Educational Development Corporation (NASDAQ: EDUC) shares currently have a dividend yield of 9.00%. Educational Development Corporation operates as a trade publisher of the line of children's books in the United States. The company has a P/E ratio of 11.09. The average volume for Educational Development Corporation has been 7,700 shares per day over the past 30 days. Educational Development Corporation has a market cap of $14.1 million and is part of the media industry. Shares are down 6.8% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Educational Development Corporation as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 61.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.68% is above that of the industry average.
- EDUC's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
- The share price of EDUCATIONAL DEVELOPMENT CORP has not done very well: it is down 19.38% 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 Distributors industry. The net income has significantly decreased by 27.4% when compared to the same quarter one year ago, falling from $0.73 million to $0.53 million.
- You can view the full Educational Development Corporation Ratings Report.
- GOOD's revenue growth has slightly outpaced the industry average of 12.1%. 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.
- GOOD's share price has surged by 27.63% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Although GOOD had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- 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 9.7%. 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% is significantly below 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 12.1%. 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.