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." Retail Properties of American Inc Class A (NYSE: RPAI) shares currently have a dividend yield of 4.80%. Inland Western Retail Real Estate Trust, Inc. is a real estate investment trust. It engages in acquisition, development and management of properties. The trust invests in the real estate markets of United States. The company has a P/E ratio of 686.00. The average volume for Retail Properties of American Inc Class A has been 843,900 shares per day over the past 30 days. Retail Properties of American Inc Class A has a market cap of $2.6 billion and is part of the real estate industry. Shares are up 12.8% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Retail Properties of American Inc Class A as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and poor profit margins. Highlights from the ratings report include:
- 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 1.7%. 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 $71.10 million or 15.50% when compared to the same quarter last year. In addition, RETAIL PPTYS OF AMERICA INC has also modestly surpassed the industry average cash flow growth rate of 5.77%.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, RETAIL PPTYS OF AMERICA INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 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 Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 9.6% when compared to the same quarter one year ago, dropping from $17.68 million to $15.97 million.
- The gross profit margin for RETAIL PPTYS OF AMERICA INC is currently extremely low, coming in at 12.72%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 11.40% significantly trails the industry average.
- You can view the full Retail Properties of American Inc Class A Ratings Report.