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." Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.70%. Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The company has a P/E ratio of 255.90 The average volume for Healthcare Realty has been 733,900 shares per day over the past 30 days Healthcare Realty has a market cap of $2.3 billion and is part of the real estate industry Shares are up 6.2% year to date as of the close of trading on Monday TheStreet Ratings rates Healthcare Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- HR's revenue growth has slightly outpaced the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 8.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- HEALTHCARE REALTY TRUST INC reported flat earnings per share in the most recent quarter. 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, HEALTHCARE REALTY TRUST INC turned its bottom line around by earning $0.10 versus -$0.04 in the prior year. This year, the market expects an improvement in earnings ($0.23 versus $0.10).
- 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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- Net operating cash flow has significantly decreased to $3.13 million or 71.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 131.9% when compared to the same quarter one year ago, falling from $3.13 million to -$1.00 million.
- You can view the full Healthcare Realty Ratings Report.