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." Iamgold (NYSE: IAG) shares currently have a dividend yield of 6.20%. IAMGOLD Corporation engages in the exploration, development, and operation of mining properties. Its products include gold, silver, niobium, and copper deposits. The company has a P/E ratio of 6.72 The average volume for Iamgold has been 7,336,500 shares per day over the past 30 days Iamgold has a market cap of $1.5 billion and is part of the metals & mining industry Shares are down 64.9% year to date as of the close of trading on Wednesday TheStreet Ratings rates Iamgold as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels 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 weak operating cash flow. Highlights from the ratings report include:
- IAG's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.87, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for IAMGOLD CORP is rather high; currently it is at 52.20%. Regardless of IAG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.57% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Metals & Mining industry. The net income has significantly decreased by 90.8% when compared to the same quarter one year ago, falling from $119.20 million to $10.90 million.
- Net operating cash flow has decreased to $99.50 million or 41.57% 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 Iamgold Ratings Report.