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 5 stocks with substantial yields, that ultimately, we have rated "Hold." BGC Partners (NASDAQ: BGCP) shares currently have a dividend yield of 8.80%. BGC Partners, Inc. operates as a brokerage company, primarily servicing the wholesale financial and real estate markets. It operates through two segments, Financial Services and Real Estate Services. The company has a P/E ratio of 12.39. The average volume for BGC Partners has been 927,100 shares per day over the past 30 days. BGC Partners has a market cap of $978.0 million and is part of the financial services industry. Shares are up 57.5% year to date as of the close of trading on Friday. TheStreet Ratings rates BGC Partners as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- This stock has managed to rise its share value by 64.65% over the past twelve months. Although BGCP 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 5715.5% when compared to the same quarter one year prior, rising from -$0.45 million to $25.33 million.
- BGC PARTNERS INC has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, BGC PARTNERS INC reported lower earnings of $0.16 versus $0.19 in the prior year. This year, the market expects an improvement in earnings ($0.47 versus $0.16).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.6%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for BGC PARTNERS INC is rather low; currently it is at 15.27%. Regardless of BGCP'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 5.84% trails the industry average.
- You can view the full BGC Partners Ratings Report.