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." American Campus Communities (NYSE: ACC) shares currently have a dividend yield of 4.40%. American Campus Communities, Inc. is an independent equity real estate investment trust. The firm invests in the real estate markets of the United States. It primarily engages in developing, owning, and managing high-quality student housing communities. The company has a P/E ratio of 68.94. The average volume for American Campus Communities has been 881,700 shares per day over the past 30 days. American Campus Communities has a market cap of $3.5 billion and is part of the real estate industry. Shares are down 28.3% year to date as of the close of trading on Friday. TheStreet Ratings rates American Campus Communities as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and poor profit margins. Highlights from the ratings report include:
- Since the same quarter one year prior, revenues rose by 41.2%. 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.
- Net operating cash flow has increased to $73.91 million or 34.68% when compared to the same quarter last year.
- 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.
- AMERICAN CAMPUS COMMUNITIES 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, AMERICAN CAMPUS COMMUNITIES reported lower earnings of $0.55 versus $0.58 in the prior year. For the next year, the market is expecting a contraction of 14.5% in earnings ($0.47 versus $0.55).
- The gross profit margin for AMERICAN CAMPUS COMMUNITIES is currently extremely low, coming in at 10.00%. It has decreased from the same quarter the previous year.
- You can view the full American Campus Communities Ratings Report.