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 4 stocks with substantial yields, that ultimately, we have rated "Hold."Gladstone Commercial Corporation (NASDAQ: GOOD) shares currently have a dividend yield of 7.60%. 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 89,500 shares per day over the past 30 days. Gladstone Commercial Corporation has a market cap of $224.2 million and is part of the real estate industry. Shares are up 9.2% 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 12.1%. 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.
- 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.
- NTE's very impressive revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues leaped by 102.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NTE's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NTE has a quick ratio of 1.95, which demonstrates the ability of the company to cover short-term liquidity needs.
- NAM TAI ELECTRONIC 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NAM TAI ELECTRONIC turned its bottom line around by earning $1.53 versus -$0.01 in the prior year. For the next year, the market is expecting a contraction of 79.7% in earnings ($0.31 versus $1.53).
- The gross profit margin for NAM TAI ELECTRONIC is currently extremely low, coming in at 9.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.80% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$4.41 million or 325.97% 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 Nam Tai Electronics Ratings Report.
- Compared to its price level of one year ago, MEMP is up 6.23% to its most recent closing price of 19.76. Looking ahead, our view is that this company's fundamentals should 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 gross profit margin for MEMORIAL PRODUCTION PRTRS LP is rather high; currently it is at 61.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.19% significantly outperformed against the industry average.
- MEMP, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio of 1.15 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, MEMP has managed to keep a strong quick ratio of 1.63, which demonstrates the ability to cover short-term cash needs.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 74.7% when compared to the same quarter one year ago, falling from $117.77 million to $29.81 million.
- You can view the full Memorial Production Partners Ratings Report.
- The gross profit margin for NORTH EUROPEAN OIL RTY TR is currently very high, coming in at 100.00%. NRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NRT's net profit margin of 96.61% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.5%. Since the same quarter one year prior, revenues slightly dropped by 6.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, NRT has underperformed the S&P 500 Index, declining 13.24% from its price level of one year ago. 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.
- NORTH EUROPEAN OIL RTY TR's earnings per share declined by 5.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, NORTH EUROPEAN OIL RTY TR reported lower earnings of $2.46 versus $2.63 in the prior year.
- 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 Oil, Gas & Consumable Fuels industry average. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from $6.26 million to $5.84 million.
- You can view the full North European Oil Royalty Ratings Report.
- Our dividend calendar.