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." Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.50%. Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 29.08. The average volume for Mid-America Apartment Communities has been 519,300 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $4.9 billion and is part of the real estate industry. Shares are up 9.7% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Mid-America Apartment Communities as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- MAA's very impressive revenue growth greatly exceeded the industry average of 6.8%. Since the same quarter one year prior, revenues leaped by 82.8%. 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.
- In its most recent trading session, MAA has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- MID-AMERICA APT CMNTYS 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MID-AMERICA APT CMNTYS INC reported lower earnings of $1.02 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.02).
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, MID-AMERICA APT CMNTYS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for MID-AMERICA APT CMNTYS INC is rather low; currently it is at 17.68%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -3.86% is significantly below that of the industry average.
- You can view the full Mid-America Apartment Communities Ratings Report.
- The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that POT's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
- 38.74% 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 14.92% compares favorably to the industry average.
- POT, with its decline in revenue, underperformed when compared the industry average of 13.3%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. 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 45.4% when compared to the same quarter one year ago, falling from $421.00 million to $230.00 million.
- Net operating cash flow has decreased to $656.00 million or 24.77% 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 38.9% when compared to the same quarter one year prior, rising from -$22.22 million to -$13.58 million.
- Net operating cash flow has increased to $20.17 million or 16.58% when compared to the same quarter last year. In addition, CYPRESS SEMICONDUCTOR CORP has also vastly surpassed the industry average cash flow growth rate of -74.93%.
- CYPRESS SEMICONDUCTOR CORP has improved earnings per share by 40.0% 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, CYPRESS SEMICONDUCTOR CORP reported poor results of -$0.32 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus -$0.32).
- CY has underperformed the S&P 500 Index, declining 5.52% 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.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CYPRESS SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Cypress Semiconductor Corporation Ratings Report.
- Net operating cash flow has increased to $2,320.00 million or 40.60% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 29.76%.
- PHILIP MORRIS INTERNATIONAL reported flat earnings per share in the most recent quarter. 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, PHILIP MORRIS INTERNATIONAL increased its bottom line by earning $5.26 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($5.38 versus $5.26).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PM has underperformed the S&P 500 Index, declining 10.93% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Tobacco industry. The net income has decreased by 5.2% when compared to the same quarter one year ago, dropping from $2,095.00 million to $1,987.00 million.
- You can view the full Philip Morris International Ratings Report.
- Our dividend calendar.