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." Pan American Silver Corporation (NASDAQ: PAAS) shares currently have a dividend yield of 4.20%. Pan American Silver Corp. engages in the exploration, development, and operation of silver producing properties and assets. It produces and sells silver, gold, copper, lead, and zinc. The company has a P/E ratio of 66.06. The average volume for Pan American Silver Corporation has been 2,634,700 shares per day over the past 30 days. Pan American Silver Corporation has a market cap of $1.8 billion and is part of the metals & mining industry. Shares are down 36.5% year to date as of the close of trading on Friday. TheStreet Ratings rates Pan American Silver Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and disappointing return on equity. Highlights from the ratings report include:
- PAAS's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- PAAS's debt-to-equity ratio is very low at 0.02 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 3.12, which clearly demonstrates the ability to cover short-term cash needs.
- 43.16% is the gross profit margin for PAN AMERICAN SILVER CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PAAS's net profit margin of 8.29% compares favorably to the industry average.
- The share price of PAN AMERICAN SILVER CORP has not done very well: it is down 18.57% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- PAN AMERICAN SILVER CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PAN AMERICAN SILVER CORP reported lower earnings of $0.61 versus $3.01 in the prior year.
- You can view the full Pan American Silver Corporation Ratings Report.
- ARR's very impressive revenue growth greatly exceeded the industry average of 12.3%. Since the same quarter one year prior, revenues leaped by 115.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARMOUR RESIDENTIAL REIT INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- ARMOUR RESIDENTIAL REIT INC's earnings per share declined by 39.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC increased its bottom line by earning $0.97 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 15.5% in earnings ($0.82 versus $0.97).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 38.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 39.58% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full ARMOUR Residential REIT Ratings Report.
- NRF's revenue growth has slightly outpaced the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 20.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 160.60% and other important driving factors, this stock has surged by 81.61% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- 49.95% is the gross profit margin for NORTHSTAR REALTY FINANCE CP which we consider to be strong. Regardless of NRF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NRF's net profit margin of 34.37% compares favorably to 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 Real Estate Investment Trusts (REITs) industry and the overall market, NORTHSTAR REALTY FINANCE CP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Northstar Realty Finance Corporation Ratings Report.
- Our dividend calendar.