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." Valley National Bancorp (NYSE: VLY) shares currently have a dividend yield of 7.20%. Valley National Bancorp operates as the bank holding company for the Valley National Bank that provides commercial, retail, and wealth management financial services. The company has a P/E ratio of 12.75. The average volume for Valley National Bancorp has been 1,074,500 shares per day over the past 30 days. Valley National Bancorp has a market cap of $1.8 billion and is part of the banking industry. Shares are down 3.9% year to date as of the close of trading on Friday. TheStreet Ratings rates Valley National Bancorp as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and weak operating cash flow. Highlights from the ratings report include:
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 75.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VLY's net profit margin of 16.98% significantly trails the industry average.
- 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 Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 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 greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 9.3% when compared to the same quarter one year ago, dropping from $34.53 million to $31.31 million.
- Net operating cash flow has significantly decreased to $40.34 million or 71.47% 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 Valley National Bancorp Ratings Report.
- VALU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Despite the fact that VALU's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
- VALU, with its decline in revenue, slightly underperformed the industry average of 1.6%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for VALUE LINE INC is rather low; currently it is at 16.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 19.52% trails that of the industry average.
- Net operating cash flow has significantly decreased to $1.38 million or 54.65% 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 Value Line Ratings Report.
- DSWL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.17, which clearly demonstrates the ability to cover short-term cash needs.
- DSWL, with its decline in revenue, underperformed when compared the industry average of 0.6%. Since the same quarter one year prior, revenues fell by 22.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- In its most recent trading session, DSWL has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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'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 Chemicals industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DESWELL INDUSTRIES INC is currently extremely low, coming in at 3.50%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -21.00% is significantly below that of the industry average.
- You can view the full Deswell Industries Ratings Report.
- Our dividend calendar.