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." CenturyLink (NYSE: CTL) shares currently have a dividend yield of 7.00%. CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The average volume for CenturyLink has been 4,862,900 shares per day over the past 30 days. CenturyLink has a market cap of $18.3 billion and is part of the telecommunications industry. Shares are down 20.9% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates CenturyLink as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The gross profit margin for CENTURYLINK INC is rather high; currently it is at 57.59%. 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 -23.14% is in-line with the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CENTURYLINK INC 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. 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, CENTURYLINK INC reported lower earnings of $1.24 versus $1.29 in the prior year. This year, the market expects an improvement in earnings ($2.68 versus $1.24).
- 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 Diversified Telecommunication Services industry and the overall market on the basis of return on equity, CENTURYLINK INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 487.0% when compared to the same quarter one year ago, falling from $270.00 million to -$1,045.00 million.
- You can view the full CenturyLink Ratings Report.
- 40.99% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 23.42% significantly outperformed against the industry.
- The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
- The revenue fell significantly faster than the industry average of 7.4%. Since the same quarter one year prior, revenues fell by 29.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 significantly decreased by 44.8% when compared to the same quarter one year ago, falling from $645.00 million to $356.00 million.
- Net operating cash flow has decreased to $616.00 million or 18.84% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Potash Corporation of Saskatchewan Ratings Report.
- The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 24.8%. 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.
- 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 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, HOSPITALITY PROPERTIES TRUST underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for HOSPITALITY PROPERTIES TRUST is rather low; currently it is at 16.11%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.68% significantly trails the industry average.
- You can view the full Hospitality Properties Ratings Report.
- Our dividend calendar.