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 3 stocks with substantial yields, that ultimately, we have rated "Hold."Frontier Communications Corp Class B (NASDAQ: FTR) shares currently have a dividend yield of 9.20%. Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to business, residential, and wholesale customers in the United States. The company has a P/E ratio of 39.55. The average volume for Frontier Communications Corp Class B has been 9,322,300 shares per day over the past 30 days. Frontier Communications Corp Class B has a market cap of $4.3 billion and is part of the telecommunications industry. Shares are up 1.6% year to date as of the close of trading on Thursday. TheStreet Ratings rates Frontier Communications Corp Class B as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- FRONTIER COMMUNICATIONS CORP 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 sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP's EPS of $0.14 remained unchanged from the prior years' EPS of $0.14. This year, the market expects an improvement in earnings ($0.23 versus $0.14).
- FTR, with its decline in revenue, slightly underperformed the industry average of 2.7%. Since the same quarter one year prior, revenues slightly dropped by 5.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Although FTR's debt-to-equity ratio of 2.07 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, FTR maintains a poor quick ratio of 0.91, which illustrates the inability to avoid short-term cash problems.
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 313.8% when compared to the same quarter one year ago, falling from $17.99 million to -$38.46 million.
- You can view the full Frontier Communications Corp Class B Ratings Report.
- 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 495.7% when compared to the same quarter one year prior, rising from -$17.40 million to $68.85 million.
- 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 6.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DUKE REALTY CORP has improved earnings per share by 41.7% 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, DUKE REALTY CORP reported poor results of -$0.52 versus -$0.27 in the prior year. This year, the market expects an improvement in earnings (-$0.10 versus -$0.52).
- The gross profit margin for DUKE REALTY CORP is rather low; currently it is at 16.04%. Regardless of DRE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 24.81% trails the industry average.
- In its most recent trading session, DRE 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. 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.
- You can view the full Duke Realty Ratings Report.
- PHILIP MORRIS INTERNATIONAL' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, PHILIP MORRIS INTERNATIONAL increased its bottom line by earning $5.18 versus $4.84 in the prior year. This year, the market expects an improvement in earnings ($5.44 versus $5.18).
- The gross profit margin for PHILIP MORRIS INTERNATIONAL is rather high; currently it is at 68.35%. Regardless of PM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PM's net profit margin of 26.82% compares favorably to the industry average.
- PM, with its decline in revenue, slightly underperformed the industry average of 2.1%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 the Tobacco industry average. The net income has decreased by 8.3% when compared to the same quarter one year ago, dropping from $2,317.00 million to $2,124.00 million.
- Net operating cash flow has declined marginally to $3,137.00 million or 9.85% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PHILIP MORRIS INTERNATIONAL has marginally lower results.
- You can view the full Philip Morris International Ratings Report.
- Our dividend calendar.