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." Potash Corporation of Saskatchewan (NYSE: POT) shares currently have a dividend yield of 4.50%. Potash Corporation of Saskatchewan Inc., together with its subsidiaries, produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada. The company mines and produces potash, which is used as fertilizer. The company has a P/E ratio of 12.05. The average volume for Potash Corporation of Saskatchewan has been 11,336,600 shares per day over the past 30 days. Potash Corporation of Saskatchewan has a market cap of $26.9 billion and is part of the chemicals industry. Shares are down 24.5% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Potash Corporation of Saskatchewan as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Chemicals industry average. The net income increased by 23.2% when compared to the same quarter one year prior, going from $522.00 million to $643.00 million.
- The gross profit margin for POTASH CORP SASK INC is rather high; currently it is at 50.56%. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 29.99% significantly outperformed against the industry.
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, POTASH CORP SASK INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has declined marginally to $1,202.00 million or 1.63% when compared to the same quarter last year. Despite a decrease in cash flow of 1.63%, POTASH CORP SASK INC is in line with the industry average cash flow growth rate of -9.43%.
- You can view the full Potash Corporation of Saskatchewan Ratings Report.
- REGAL ENTERTAINMENT GROUP 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, REGAL ENTERTAINMENT GROUP increased its bottom line by earning $0.93 versus $0.27 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.93).
- RGC, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 6.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to its closing price of one year ago, RGC's share price has jumped by 46.19%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- Net operating cash flow has declined marginally to $110.90 million or 5.61% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, REGAL ENTERTAINMENT GROUP has marginally lower results.
- 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 Media industry. The net income has significantly decreased by 51.4% when compared to the same quarter one year ago, falling from $46.30 million to $22.50 million.
- You can view the full Regal Entertainment Group Ratings Report.
- CANADIAN IMPERIAL BANK has improved earnings per share by 11.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, CANADIAN IMPERIAL BANK increased its bottom line by earning $7.85 versus $7.30 in the prior year.
- The gross profit margin for CANADIAN IMPERIAL BANK is currently very high, coming in at 72.95%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.90% is above that of the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 7.9% when compared to the same quarter one year prior, going from $810.00 million to $874.00 million.
- 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. In comparison to the other companies in the Commercial Banks industry and the overall market, CANADIAN IMPERIAL BANK's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- In its most recent trading session, CM 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.
- You can view the full Canadian Imperial Bank of Commerce Ratings Report.
- Our dividend calendar.