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." Valassis Communications (NYSE: VCI) shares currently have a dividend yield of 5.00%. Valassis Communications, Inc., together with its subsidiaries, provides media solutions primarily in the United States and Europe. The company has a P/E ratio of 9.68 The average volume for Valassis Communications has been 468,700 shares per day over the past 30 days Valassis Communications has a market cap of $961.0 million and is part of the media industry Shares are down 4.6% year to date as of the close of trading on Friday TheStreet Ratings rates Valassis Communications as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and poor profit margins. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 63.14% to $23.45 million when compared to the same quarter last year. In addition, VALASSIS COMMUNICATIONS INC has also vastly surpassed the industry average cash flow growth rate of 0.07%.
- 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. 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.
- 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 Media industry average. The net income has decreased by 18.0% when compared to the same quarter one year ago, dropping from $26.42 million to $21.67 million.
- The gross profit margin for VALASSIS COMMUNICATIONS INC is currently lower than what is desirable, coming in at 27.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.49% significantly trails the industry average.
- You can view the full Valassis Communications Ratings Report.