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." Companhia Siderurgica Nacional (NYSE: SID) shares currently have a dividend yield of 4.40%. Companhia Siderurgica Nacional operates as an integrated steel producer primarily in Brazil. The company principally produces carbon steel and various steel products for automotive, home appliance, packaging, construction, and steel processing industries. The average volume for Companhia Siderurgica Nacional has been 7,468,500 shares per day over the past 30 days. Companhia Siderurgica Nacional has a market cap of $7.8 billion and is part of the metals & mining industry. Shares are down 8.1% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Companhia Siderurgica Nacional as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 13.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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. In comparison to the other companies in the Metals & Mining industry and the overall market, COMPANHIA SIDERURGICA NACION's return on equity significantly exceeds that of the industry average and is above that of 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The debt-to-equity ratio is very high at 3.67 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, SID has managed to keep a strong quick ratio of 2.09, which demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has decreased to $272.23 million or 32.78% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, COMPANHIA SIDERURGICA NACION has marginally lower results.
- You can view the full Companhia Siderurgica Nacional Ratings Report.
- 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, ROYAL BANK OF CANADA's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 220.06% to $2,735.00 million when compared to the same quarter last year. In addition, ROYAL BANK OF CANADA has also vastly surpassed the industry average cash flow growth rate of 150.87%.
- 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.
- RY, with its decline in revenue, slightly underperformed the industry average of 2.8%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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 2.8% when compared to the same quarter one year prior, going from $2,216.00 million to $2,279.00 million.
- You can view the full Royal Bank Of Canada Ratings Report.
- BANK OF MONTREAL's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, BANK OF MONTREAL increased its bottom line by earning $6.25 versus $6.15 in the prior year.
- The gross profit margin for BANK OF MONTREAL is currently very high, coming in at 83.68%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, BMO's net profit margin of 20.02% significantly trails the industry average.
- Net operating cash flow has significantly increased by 65.96% to -$4,785.00 million when compared to the same quarter last year. Despite an increase in cash flow of 65.96%, BANK OF MONTREAL is still growing at a significantly lower rate than the industry average of 150.87%.
- 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 1.0% when compared to the same quarter one year prior, going from $1,064.00 million to $1,075.00 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. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF MONTREAL has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Bank of Montreal Ratings Report.
- WEINGARTEN REALTY INVST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WEINGARTEN REALTY INVST turned its bottom line around by earning $0.20 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $0.20).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 50.3% when compared to the same quarter one year prior, rising from $40.27 million to $60.54 million.
- 37.09% is the gross profit margin for WEINGARTEN REALTY INVST which we consider to be strong. Regardless of WRI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WRI's net profit margin of 43.98% significantly outperformed against the industry.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WEINGARTEN REALTY INVST's return on equity is below that of both the industry average and the S&P 500.
- In its most recent trading session, WRI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- You can view the full Weingarten Realty Investors Ratings Report.
- Our dividend calendar.