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."Iamgold (NYSE: IAG) shares currently have a dividend yield of 5.20%. IAMGOLD Corporation engages in the exploration, development, and operation of mining properties. Its products include gold, silver, niobium, and copper deposits. The company has a P/E ratio of 12.76. The average volume for Iamgold has been 8,340,200 shares per day over the past 30 days. Iamgold has a market cap of $1.8 billion and is part of the metals & mining industry. Shares are down 57.7% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Iamgold 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 feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow. Highlights from the ratings report include:
- IAG's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, IAG has a quick ratio of 2.16, which demonstrates the ability of the company to cover short-term liquidity needs.
- 43.08% is the gross profit margin for IAMGOLD CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, IAG's net profit margin of -9.43% significantly underperformed when compared to the industry average.
- 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 Metals & Mining industry. The net income has significantly decreased by 153.7% when compared to the same quarter one year ago, falling from $52.90 million to -$28.40 million.
- Net operating cash flow has decreased to $37.90 million or 28.08% 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 Iamgold Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 5.3% when compared to the same quarter one year prior, going from $243.00 million to $256.00 million.
- 37.29% is the gross profit margin for WILLIAMS PARTNERS LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.82% is above that of the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.4%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- WPZ's debt-to-equity ratio of 0.94 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.30 is very low and demonstrates very weak liquidity.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, WILLIAMS PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Williams Partners Ratings Report.
- KMI's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 56.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 Oil, Gas & Consumable Fuels industry. The net income increased by 319.8% when compared to the same quarter one year prior, rising from -$126.00 million to $277.00 million.
- KINDER MORGAN 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, KINDER MORGAN INC increased its bottom line by earning $1.22 versus $0.55 in the prior year. For the next year, the market is expecting a contraction of 4.9% in earnings ($1.16 versus $1.22).
- In its most recent trading session, KMI 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 debt-to-equity ratio is very high at 2.60 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.34, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Kinder Morgan Ratings Report.
- Our dividend calendar.