Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.90%. Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The average volume for Healthcare Realty has been 879,600 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 2.5% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Healthcare Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 8.3%. 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.
- HEALTHCARE REALTY TRUST INC 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. 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 ($0.22 versus $0.10).
- The gross profit margin for HEALTHCARE REALTY TRUST INC is currently lower than what is desirable, coming in at 26.15%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -28.72% is significantly below that of the industry average.
- Net operating cash flow has declined marginally to $40.42 million or 3.43% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, HEALTHCARE REALTY TRUST INC has marginally lower results.
- You can view the full Healthcare Realty Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 800.8% when compared to the same quarter one year prior, rising from -$261.00 million to $1,829.00 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- AMERICAN CAPITAL AGENCY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, AMERICAN CAPITAL AGENCY CORP reported lower earnings of $4.40 versus $5.22 in the prior year. This year, the market expects an improvement in earnings ($6.88 versus $4.40).
- The revenue fell significantly faster than the industry average of 9.2%. Since the same quarter one year prior, revenues fell by 39.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- AGNC's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.85%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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 American Capital Agency Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 113.4% when compared to the same quarter one year prior, rising from -$246.74 million to $32.97 million.
- NUSTAR ENERGY LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, NUSTAR ENERGY LP swung to a loss, reporting -$2.79 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($1.11 versus -$2.79).
- NS, with its very weak revenue results, has greatly underperformed against the industry average of 10.2%. Since the same quarter one year prior, revenues plummeted by 52.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for NUSTAR ENERGY LP is rather low; currently it is at 15.52%. Regardless of NS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.64% trails the industry average.
- NS has underperformed the S&P 500 Index, declining 16.11% from its price level of one year ago. 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.
- You can view the full NuStar Energy L.P Ratings Report.
- Our dividend calendar.