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 4 stocks with substantial yields, that ultimately, we have rated "Hold."American Campus Communities (NYSE: ACC) shares currently have a dividend yield of 4.20%. American Campus Communities, Inc. is an independent equity real estate investment trust. The firm invests in the real estate markets of the United States. It primarily engages in developing, owning, and managing high-quality student housing communities. The company has a P/E ratio of 73.81. The average volume for American Campus Communities has been 831,400 shares per day over the past 30 days. American Campus Communities has a market cap of $3.6 billion and is part of the real estate industry. Shares are down 24.6% year to date as of the close of trading on Friday. TheStreet Ratings rates American Campus Communities as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and good cash flow from operations. 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 unimpressive growth in net income. Highlights from the ratings report include:
- ACC's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 53.3%. 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.
- Net operating cash flow has increased to $45.73 million or 43.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.77%.
- 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, AMERICAN CAMPUS COMMUNITIES underperformed against that of the industry average and is significantly less than that of the S&P 500.
- AMERICAN CAMPUS COMMUNITIES 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. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, AMERICAN CAMPUS COMMUNITIES reported lower earnings of $0.57 versus $0.58 in the prior year. For the next year, the market is expecting a contraction of 7.0% in earnings ($0.53 versus $0.57).
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 34.7% when compared to the same quarter one year ago, falling from $12.33 million to $8.05 million.
- You can view the full American Campus Communities Ratings Report.
- The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has slightly increased to $4,162.84 million or 2.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -33.49%.
- The gross profit margin for VALE SA is rather high; currently it is at 52.79%. Regardless of VALE'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 1.24% trails 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 Metals & Mining industry. The net income has significantly decreased by 94.9% when compared to the same quarter one year ago, falling from $2,298.57 million to $117.72 million.
- The share price of VALE SA has not done very well: it is down 15.95% 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.
- You can view the full Vale Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.8%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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.
- CBL & ASSOCIATES PPTYS 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, CBL & ASSOCIATES PPTYS INC increased its bottom line by earning $0.63 versus $0.49 in the prior year. This year, the market expects an improvement in earnings ($0.65 versus $0.63).
- The gross profit margin for CBL & ASSOCIATES PPTYS INC is currently lower than what is desirable, coming in at 30.97%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.41% significantly trails the industry average.
- Net operating cash flow has declined marginally to $122.16 million or 4.53% 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 CBL & Associates Properties Ratings Report.
- Net operating cash flow has significantly increased by 178.46% to $2,598.00 million when compared to the same quarter last year. In addition, BANK OF MONTREAL has also vastly surpassed the industry average cash flow growth rate of 112.08%.
- 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. 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.5%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. 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 Commercial Banks industry and the overall market, BANK OF MONTREAL's return on equity exceeds that of both the industry average and the S&P 500.
- The change in net income 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 has decreased by 5.2% when compared to the same quarter one year ago, dropping from $1,010.00 million to $957.00 million.
- You can view the full Bank of Montreal Ratings Report.
- Our dividend calendar.