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 4 stocks with substantial yields, that ultimately, we have rated "Hold."Digital Realty (NYSE: DLR) shares currently have a dividend yield of 6.70%. Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The company has a P/E ratio of 21.74. The average volume for Digital Realty has been 1,803,800 shares per day over the past 30 days. Digital Realty has a market cap of $6.0 billion and is part of the real estate industry. Shares are down 33% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Digital Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- DLR's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 10.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DIGITAL REALTY TRUST INC 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, DIGITAL REALTY TRUST INC increased its bottom line by earning $1.47 versus $1.31 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.47).
- DLR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 29.43%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The gross profit margin for DIGITAL REALTY TRUST INC is rather low; currently it is at 22.86%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 39.47% has significantly outperformed against the industry average.
- You can view the full Digital Realty Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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. 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 gross profit margin for BRANDYWINE REALTY TRUST is rather low; currently it is at 21.62%. Regardless of BDN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BDN's net profit margin of 7.60% is significantly lower than the industry average.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 34.7% when compared to the same quarter one year ago, falling from $16.83 million to $10.98 million.
- You can view the full Brandywine Realty Ratings Report.
- The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 14.4%. 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 $465.00 million or 32.17% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.02%.
- ENBRIDGE ENERGY PRTNRS -LP 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, ENBRIDGE ENERGY PRTNRS -LP reported lower earnings of $1.25 versus $1.89 in the prior year. For the next year, the market is expecting a contraction of 44.0% in earnings ($0.70 versus $1.25).
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 80.9% when compared to the same quarter one year ago, falling from $215.20 million to $41.00 million.
- You can view the full Enbridge Energy Partners Ratings Report.
- 39.05% is the gross profit margin for SOC QUIMICA Y MINERA DE CHI which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SQM's net profit margin of 26.65% significantly outperformed against the industry.
- SQM, with its decline in revenue, underperformed when compared the industry average of 7.4%. Since the same quarter one year prior, revenues fell by 15.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 Chemicals industry and the overall market, SOC QUIMICA Y MINERA DE CHI's return on equity exceeds that of both the industry average and the S&P 500.
- Looking at the price performance of SQM's shares over the past 12 months, there is not much good news to report: the stock is down 57.91%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 Chemicals industry. The net income has decreased by 15.9% when compared to the same quarter one year ago, dropping from $165.18 million to $138.90 million.
- You can view the full Sociedad Quimica Y Minera De Chile Ratings Report.
- Our dividend calendar.