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."Compuware Corporation (NASDAQ: CPWR) shares currently have a dividend yield of 4.60%. Compuware Corporation provides services, software, and practices for information technology (IT) organizations worldwide. The average volume for Compuware Corporation has been 2,284,700 shares per day over the past 30 days. Compuware Corporation has a market cap of $2.4 billion and is part of the computer software & services industry. Shares are up 0.3% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Compuware Corporation as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and increase in stock price during the past year. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 54.2% when compared to the same quarter one year prior, rising from $10.59 million to $16.34 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- COMPUWARE CORP has improved earnings per share by 40.0% in the most recent quarter compared to the same quarter a year ago. 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, COMPUWARE CORP swung to a loss, reporting -$0.08 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($0.48 versus -$0.08).
- The gross profit margin for COMPUWARE CORP is rather high; currently it is at 66.13%. Regardless of CPWR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CPWR's net profit margin of 7.16% is significantly lower than the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Software industry and the overall market, COMPUWARE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Compuware Corporation Ratings Report.
- PCG's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 5.0%. 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.
- Net operating cash flow has slightly increased to $1,374.00 million or 7.51% when compared to the same quarter last year. Despite an increase in cash flow, PG&E CORP's cash flow growth rate is still lower than the industry average growth rate of 26.30%.
- 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 Multi-Utilities industry. The net income has significantly decreased by 54.9% when compared to the same quarter one year ago, falling from $364.00 million to $164.00 million.
- 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. When compared to other companies in the Multi-Utilities industry and the overall market, PG&E CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full PG&E Ratings Report.
- NRF's very impressive revenue growth greatly exceeded the industry average of 9.5%. Since the same quarter one year prior, revenues leaped by 50.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 38.73% and other important driving factors, this stock has surged by 56.39% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The gross profit margin for NORTHSTAR REALTY FINANCE CP is rather high; currently it is at 61.93%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -71.54% is in-line with the industry average.
- 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.2% when compared to the same quarter one year prior, going from -$142.91 million to -$135.44 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NORTHSTAR REALTY FINANCE CP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Northstar Realty Finance Corporation Ratings Report.
- Our dividend calendar.