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."BioMed Realty (NYSE: BMR) shares currently have a dividend yield of 4.90%. BioMed Realty Trust, Inc. operates as a real estate investment trust (REIT) that focuses on providing real estate to the life science industry in the United States. The company has a P/E ratio of 112.41. The average volume for BioMed Realty has been 1,491,200 shares per day over the past 30 days. BioMed Realty has a market cap of $3.7 billion and is part of the real estate industry. Shares are down 1.1% year to date as of the close of trading on Tuesday. TheStreet Ratings rates BioMed Realty as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins and 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 10.8%. Since the same quarter one year prior, revenues rose by 28.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 392.7% when compared to the same quarter one year prior, rising from -$5.06 million to $14.81 million.
- BIOMED REALTY TRUST INC 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, BIOMED REALTY TRUST INC reported lower earnings of $0.01 versus $0.18 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus $0.01).
- In its most recent trading session, BMR 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The gross profit margin for BIOMED REALTY TRUST INC is currently lower than what is desirable, coming in at 25.95%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, BMR's net profit margin of 9.29% is significantly lower than the industry average.
- You can view the full BioMed Realty Ratings Report.
- ARR's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 63.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, ARMOUR RESIDENTIAL REIT INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- ARMOUR RESIDENTIAL REIT 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ARMOUR RESIDENTIAL REIT INC increased its bottom line by earning $0.97 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 27.8% in earnings ($0.70 versus $0.97).
- ARR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.72%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full ARMOUR Residential REIT Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Chemicals industry average. The net income increased by 23.2% when compared to the same quarter one year prior, going from $522.00 million to $643.00 million.
- The gross profit margin for POTASH CORP SASK INC is rather high; currently it is at 50.56%. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 29.99% significantly outperformed against the industry.
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, POTASH CORP SASK INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has declined marginally to $1,202.00 million or 1.63% when compared to the same quarter last year. Despite a decrease in cash flow of 1.63%, POTASH CORP SASK INC is in line with the industry average cash flow growth rate of -7.45%.
- You can view the full Potash Corporation of Saskatchewan Ratings Report.
- Our dividend calendar.