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." Canadian Imperial Bank of Commerce (NYSE: CM) shares currently have a dividend yield of 4.30%. Canadian Imperial Bank of Commerce provides various financial products and services in Canada and internationally. It operates through three segments: Retail and Business Banking, Wealth Management, and Wholesale Banking. The company has a P/E ratio of 10.68. The average volume for Canadian Imperial Bank of Commerce has been 181,500 shares per day over the past 30 days. Canadian Imperial Bank of Commerce has a market cap of $34.8 billion and is part of the banking industry. Shares are up 7.9% year to date as of the close of trading on Monday. TheStreet Ratings rates Canadian Imperial Bank of Commerce as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and growth in earnings per share. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive. Highlights from the ratings report include:
- CM's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 1.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market, CANADIAN IMPERIAL BANK's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for CANADIAN IMPERIAL BANK is currently very high, coming in at 71.68%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CM's net profit margin of 20.59% significantly trails the industry average.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Commercial Banks industry average. The net income increased by 6.1% when compared to the same quarter one year prior, going from $839.00 million to $890.00 million.
- You can view the full Canadian Imperial Bank of Commerce Ratings Report.