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." Educational Development Corporation (NASDAQ: EDUC) shares currently have a dividend yield of 12.80%. Educational Development Corporation operates as a trade publisher of the line of children's books in the United States. The company has a P/E ratio of 19.23. The average volume for Educational Development Corporation has been 5,000 shares per day over the past 30 days. Educational Development Corporation has a market cap of $10.0 million and is part of the media industry. Shares are down 34.4% year to date as of the close of trading on Friday. TheStreet Ratings rates Educational Development Corporation as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. 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 deteriorating net income. Highlights from the ratings report include:
- EDUC's debt-to-equity ratio is very low at 0.03 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 1.01, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 58.67%. Regardless of EDUC'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 1.11% trails the industry average.
- EDUCATIONAL DEVELOPMENT 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, EDUCATIONAL DEVELOPMENT CORP reported lower earnings of $0.20 versus $0.36 in the prior year.
- 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 Distributors industry. The net income has significantly decreased by 80.8% when compared to the same quarter one year ago, falling from $0.35 million to $0.07 million.
- You can view the full Educational Development Corporation Ratings Report.
- NKA's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 193.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NISKA GAS STORAGE PARTNERS 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.63 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus -$0.63).
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NISKA GAS STORAGE PARTNERS's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.13 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, NKA has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Niska Gas Storage Partners Ratings Report.
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 22.7%. 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 slightly increased to $25.61 million or 9.08% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -15.63%.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 29.5% when compared to the same quarter one year ago, falling from $7.81 million to $5.51 million.
- The debt-to-equity ratio of 1.49 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, PVR maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
- You can view the full PVR Partners Ratings Report.
- GOOD's revenue growth has slightly outpaced the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 14.9%. 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.
- 48.32% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 3.15% is significantly lower than the industry average.
- In its most recent trading session, GOOD 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $4.49 million or 12.74% 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 Gladstone Commercial Corporation Ratings Report.
- Our dividend calendar.