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." R.R. Donnelley & Sons Company (NASDAQ: RRD) shares currently have a dividend yield of 5.70%. R.R. Donnelley & Sons Company provides integrated communication solutions to private and public sectors worldwide. The average volume for R.R. Donnelley & Sons Company has been 2,207,500 shares per day over the past 30 days. R.R. Donnelley & Sons Company has a market cap of $3.3 billion and is part of the diversified services industry. Shares are down 9.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates R.R. Donnelley & Sons Company as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.8%. 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 107.97%, 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.
- OZM's very impressive revenue growth greatly exceeded the industry average of 14.8%. Since the same quarter one year prior, revenues leaped by 52.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 115.73% and other important driving factors, this stock has surged by 67.27% 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 283.19% to $215.81 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 255.90%.
- The gross profit margin for OCH-ZIFF CAPITAL MGMT LP is rather high; currently it is at 58.38%. 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 9.69% trails the industry average.
- You can view the full Och-Ziff Capital Management Group Ratings Report.
- 44.90% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.98% trails the industry average.
- FRONTIER COMMUNICATIONS CORP's earnings per share declined by 42.9% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP's EPS of $0.14 remained unchanged from the prior years' EPS of $0.14. This year, the market expects an improvement in earnings ($0.23 versus $0.14).
- 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 47.2% when compared to the same quarter one year ago, falling from $67.00 million to $35.40 million.
- Net operating cash flow has declined marginally to $394.63 million or 1.95% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, FRONTIER COMMUNICATIONS CORP has marginally lower results.
- You can view the full Frontier Communications Corp Class B Ratings Report.
- Our dividend calendar.