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 4.50%. Compuware Corporation provides services, software, and practices for information technology (IT) organizations worldwide. The average volume for Compuware Corporation has been 2,279,300 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 3.2% 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 good cash flow from operations. 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 6.2%. 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.
- 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 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.
- FE, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FIRSTENERGY CORP's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIRSTENERGY CORP reported lower earnings of $1.81 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($2.99 versus $1.81).
- 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 Electric Utilities industry. The net income has significantly decreased by 48.7% when compared to the same quarter one year ago, falling from $425.00 million to $218.00 million.
- The gross profit margin for FIRSTENERGY CORP is currently lower than what is desirable, coming in at 28.54%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.42% trails that of the industry average.
- Net operating cash flow has declined marginally to $1,178.00 million or 2.96% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, FIRSTENERGY CORP has marginally lower results.
- You can view the full FirstEnergy Ratings Report.
- APL's very impressive revenue growth greatly exceeded the industry average of 5.4%. Since the same quarter one year prior, revenues leaped by 97.2%. 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 $79.40 million or 30.18% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.10%.
- 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.
- ATLAS PIPELINE PARTNER 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, ATLAS PIPELINE PARTNER LP reported lower earnings of $0.97 versus $5.22 in the prior year. For the next year, the market is expecting a contraction of 193.8% in earnings (-$0.91 versus $0.97).
- 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 244.2% when compared to the same quarter one year ago, falling from -$7.87 million to -$27.08 million.
- You can view the full Atlas Pipeline Partners Ratings Report.
- Our dividend calendar.