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 5 stocks with substantial yields, that ultimately, we have rated "Hold." James Hardie Industries (NYSE: JHX) shares currently have a dividend yield of 8.30%. James Hardie Industries plc, together with its subsidiaries, manufactures and sells fiber cement products and systems for interior and exterior building construction applications primarily in the United States, Canada, Australia, New Zealand, the Philippines, and Europe. The company has a P/E ratio of 88.92. The average volume for James Hardie Industries has been 5,800 shares per day over the past 30 days. James Hardie Industries has a market cap of $3.9 billion and is part of the materials & construction industry. Shares are down 8.2% year to date as of the close of trading on Wednesday. TheStreet Ratings rates James Hardie Industries as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 13.1%. Since the same quarter one year prior, revenues slightly increased by 9.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 38.07% is the gross profit margin for JAMES HARDIE INDUSTRIES PLC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 38.20% significantly outperformed against the industry average.
- JAMES HARDIE INDUSTRIES PLC 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, JAMES HARDIE INDUSTRIES PLC reported lower earnings of $0.51 versus $6.89 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $0.51).
- In its most recent trading session, JHX 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 James Hardie Industries Ratings Report.