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."Home Properties (NYSE: HME) shares currently have a dividend yield of 4.90%. Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 36.06. The average volume for Home Properties has been 528,400 shares per day over the past 30 days. Home Properties has a market cap of $3.3 billion and is part of the real estate industry. Shares are down 7.3% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Home Properties as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- HOME PROPERTIES INC reported significant earnings per share improvement 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HOME PROPERTIES INC increased its bottom line by earning $1.27 versus $0.81 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $1.27).
- 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 97.0% when compared to the same quarter one year prior, rising from $13.73 million to $27.04 million.
- Net operating cash flow has slightly increased to $74.98 million or 4.53% when compared to the same quarter last year. Despite an increase in cash flow, HOME PROPERTIES INC's average is still marginally south of the industry average growth rate of 5.48%.
- HME has underperformed the S&P 500 Index, declining 9.94% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for HOME PROPERTIES INC is currently lower than what is desirable, coming in at 34.07%. Regardless of HME's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HME's net profit margin of 16.17% is significantly lower than the industry average.
- You can view the full Home Properties Ratings Report.
- VIV's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for TELEFONICA BRASIL SA is rather high; currently it is at 61.19%. Regardless of VIV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VIV's net profit margin of 10.89% compares favorably to the industry average.
- 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 Diversified Telecommunication Services industry and the overall market, TELEFONICA BRASIL SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has declined marginally to $798.50 million or 4.83% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, TELEFONICA BRASIL SA has marginally lower results.
- You can view the full Telefonica Brasil S.A Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 71.3% when compared to the same quarter one year prior, rising from $286.00 million to $490.00 million.
- EXC's revenue growth trails the industry average of 16.0%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that EXC's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
- EXC has underperformed the S&P 500 Index, declining 16.78% 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.
- 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. When compared to other companies in the Electric Utilities industry and the overall market, EXELON CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Exelon Ratings Report.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 82.9% when compared to the same quarter one year prior, rising from $8.95 million to $16.38 million.
- RYMAN HOSPITALITY PPTYS INC has improved earnings per share by 5.9% 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, RYMAN HOSPITALITY PPTYS INC swung to a loss, reporting -$0.60 versus $0.20 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus -$0.60).
- RHP, with its decline in revenue, underperformed when compared the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has decreased to $37.95 million or 41.81% 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.
- RHP has underperformed the S&P 500 Index, declining 17.05% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Ryman Hospitality Properties Ratings Report.
- Our dividend calendar.