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." Newmont Mining Corporation (NYSE: NEM) shares currently have a dividend yield of 4.10%. Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company's assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, Mexico, and New Zealand. The company has a P/E ratio of 10.41. The average volume for Newmont Mining Corporation has been 8,570,000 shares per day over the past 30 days. Newmont Mining Corporation has a market cap of $16.9 billion and is part of the metals & mining industry. Shares are down 26.2% year to date as of the close of trading on Friday. TheStreet Ratings rates Newmont Mining Corporation as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 43.24% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Net operating cash flow has decreased to $433.00 million or 28.89% when compared to the same quarter last year. Despite a decrease in cash flow of 28.89%, NEWMONT MINING CORP is in line with the industry average cash flow growth rate of -35.28%.
- You can view the full Newmont Mining Corporation Ratings Report.
- ARR's very impressive revenue growth greatly exceeded the industry average of 12.0%. Since the same quarter one year prior, revenues leaped by 115.9%. 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARMOUR RESIDENTIAL REIT INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- ARMOUR RESIDENTIAL REIT INC's earnings per share declined by 39.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC increased its bottom line by earning $0.97 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 14.4% in earnings ($0.83 versus $0.97).
- The share price of ARMOUR RESIDENTIAL REIT INC has not done very well: it is down 23.42% 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.
- You can view the full ARMOUR Residential REIT Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 79.8% when compared to the same quarter one year prior, rising from $26.77 million to $48.14 million.
- 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. 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.
- The debt-to-equity ratio is very high at 2.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, FTR has managed to keep a strong quick ratio of 1.51, which demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has declined marginally to $359.29 million or 6.07% 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 Frontier Communications Corp Class B Ratings Report.
- The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 26.69%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.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.
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.0%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- BRANDYWINE REALTY TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BRANDYWINE REALTY TRUST reported poor results of -$0.32 versus -$0.19 in the prior year. This year, the market expects an improvement in earnings ($0.09 versus -$0.32).
- 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 57.7% when compared to the same quarter one year ago, falling from $9.20 million to $3.89 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, BRANDYWINE REALTY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Brandywine Realty Ratings Report.
- Our dividend calendar.