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." Mobile Telesystems OJSC (NYSE: MBT) shares currently have a dividend yield of 4.20%. Mobile TeleSystems OJSC provides mobile and fixed voice, broadband, and pay TV, as well as content and entertainment services in Russia, eastern Europe, and central Asia. The company has a P/E ratio of 18.63. The average volume for Mobile Telesystems OJSC has been 1,934,000 shares per day over the past 30 days. Mobile Telesystems OJSC has a market cap of $18.9 billion and is part of the telecommunications industry. Shares are up 1.9% year to date as of the close of trading on Thursday. TheStreet Ratings rates Mobile Telesystems OJSC as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- The gross profit margin for MOBILE TELESYSTEMS OJSC is currently very high, coming in at 71.37%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.96% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 0.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- In its most recent trading session, MBT 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. 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 Wireless Telecommunication Services industry average. The net income has decreased by 18.4% when compared to the same quarter one year ago, dropping from $511.74 million to $417.80 million.
- Currently the debt-to-equity ratio of 1.79 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, MBT maintains a poor quick ratio of 0.73, which illustrates the inability to avoid short-term cash problems.
- You can view the full Mobile Telesystems OJSC Ratings Report.
- The gross profit margin for MFA FINANCIAL INC is currently very high, coming in at 93.20%. Regardless of MFA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MFA's net profit margin of 62.19% significantly outperformed against the industry.
- MFA, with its decline in revenue, underperformed when compared the industry average of 12.3%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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, MFA FINANCIAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $71.17 million or 10.96% when compared to the same quarter last year. Despite a decrease in cash flow of 10.96%, MFA FINANCIAL INC is in line with the industry average cash flow growth rate of -14.81%.
- You can view the full MFA Financial Ratings Report.
- Net operating cash flow has increased to $67.00 million or 19.49% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -25.63%.
- 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, 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for REGENCY ENERGY PARTNERS LP is rather low; currently it is at 21.49%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.43% is significantly below that of 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 117.5% when compared to the same quarter one year ago, falling from $28.50 million to -$5.00 million.
- You can view the full Regency Energy Partners Ratings Report.
- Our dividend calendar.