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." CommonWealth REIT (NYSE: CWH) shares currently have a dividend yield of 4.30%. CommonWealth REIT is a real estate investment trust launched and managed by Reit Management & Research LLC. The fund invests in the real estate markets of the United States. It seeks to invest in office buildings, industrial buildings, and leased industrial land. The company has a P/E ratio of 60.61. The average volume for CommonWealth REIT has been 753,500 shares per day over the past 30 days. CommonWealth REIT has a market cap of $2.7 billion and is part of the real estate industry. Shares are up 45.2% year to date as of the close of trading on Thursday. TheStreet Ratings rates CommonWealth REIT as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, reasonable valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Compared to its closing price of one year ago, CWH's share price has jumped by 64.73%, exceeding the performance of the broader market during that same time frame. Although CWH had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- CWH, with its decline in revenue, underperformed when compared the industry average of 8.3%. Since the same quarter one year prior, revenues slightly dropped by 7.7%. 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 significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 1327.8% when compared to the same quarter one year ago, falling from $17.62 million to -$216.32 million.
- The gross profit margin for COMMONWEALTH REIT is rather low; currently it is at 19.32%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -101.81% is significantly below that of the industry average.
- You can view the full CommonWealth REIT Ratings Report.
- 40.99% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. 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 23.42% significantly outperformed against the industry.
- The current debt-to-equity ratio, 0.36, 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 0.80 is somewhat weak and could be cause for future problems.
- The revenue fell significantly faster than the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 29.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Chemicals industry. The net income has significantly decreased by 44.8% when compared to the same quarter one year ago, falling from $645.00 million to $356.00 million.
- Net operating cash flow has decreased to $616.00 million or 18.84% 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 Potash Corporation of Saskatchewan Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 4.0%. 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.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RETAIL PPTYS OF AMERICA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- RETAIL PPTYS OF AMERICA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This year, the market expects an improvement in earnings (-$0.02 versus -$0.03).
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 135.4% when compared to the same quarter one year ago, falling from -$15.95 million to -$37.55 million.
- You can view the full Retail Properties of American Inc Class A Ratings Report.
- Our dividend calendar.