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 5 stocks with substantial yields, that ultimately, we have rated "Hold."VimpelCom (NASDAQ: VIP) shares currently have a dividend yield of 7.30%. VimpelCom Ltd., a telecommunications service operator, provides voice and data services through a range of traditional and broadband mobile and fixed technologies. The company has a P/E ratio of 10.11. The average volume for VimpelCom has been 3,137,500 shares per day over the past 30 days. VimpelCom has a market cap of $20.1 billion and is part of the telecommunications industry. Shares are down 6.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates VimpelCom as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, VIMPELCOM LTD's return on equity exceeds that of both the industry average and 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.
- Currently the debt-to-equity ratio of 1.90 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, VIP maintains a poor quick ratio of 0.85, which illustrates the inability to avoid short-term cash problems.
- Net operating cash flow has decreased to $1,675.00 million or 16.16% 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 VimpelCom Ratings Report.
- RRD's revenue growth has slightly outpaced the industry average of 5.3%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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.
- Compared to its closing price of one year ago, RRD's share price has jumped by 122.02%, exceeding the performance of the broader market during that same time frame. 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 DONNELLEY (R R) & SONS CO is rather low; currently it is at 21.81%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.56% trails that of 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 Commercial Services & Supplies industry. The net income has significantly decreased by 79.4% when compared to the same quarter one year ago, falling from $71.40 million to $14.70 million.
- You can view the full R.R. Donnelley & Sons Company Ratings Report.
- The revenue growth came in higher than the industry average of 2.2%. Since the same quarter one year prior, revenues rose by 17.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 220.00% and other important driving factors, this stock has surged by 35.32% 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.
- Net operating cash flow has significantly increased by 86.11% to -$1.00 million when compared to the same quarter last year. In addition, REGAL ENTERTAINMENT GROUP has also vastly surpassed the industry average cash flow growth rate of 15.01%.
- The gross profit margin for REGAL ENTERTAINMENT GROUP is rather low; currently it is at 22.33%. Regardless of RGC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.23% trails the industry average.
- You can view the full Regal Entertainment Group Ratings Report.
- FE, with its decline in revenue, slightly underperformed the industry average of 2.0%. 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 ($2.98 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.
- O's very impressive revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues leaped by 70.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 37.7% when compared to the same quarter one year prior, rising from $37.46 million to $51.57 million.
- REALTY INCOME CORP has improved earnings per share by 5.9% 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, REALTY INCOME CORP reported lower earnings of $0.75 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($0.99 versus $0.75).
- O has underperformed the S&P 500 Index, declining 9.15% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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, REALTY INCOME CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Realty Income Corporation Ratings Report.
- Our dividend calendar.