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." Cellcom Israel (NYSE: CEL) shares currently have a dividend yield of 7.80%. Cellcom Israel Ltd. provides cellular communications services in Israel. The company operates in two segments, Cellcom and Netvision. It offers basic and advanced cellular telephone services, text and multimedia messaging services, and advanced cellular content and data services. The company has a P/E ratio of 8.61. The average volume for Cellcom Israel has been 89,200 shares per day over the past 30 days. Cellcom Israel has a market cap of $1.2 billion and is part of the telecommunications industry. Shares are down 10.3% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Cellcom Israel as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and generally higher debt management risk. Highlights from the ratings report include:
- Compared to its closing price of one year ago, CEL's share price has jumped by 54.80%, 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.
- CEL, with its decline in revenue, underperformed when compared the industry average of 7.8%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. 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 Wireless Telecommunication Services industry. The net income has significantly decreased by 52.1% when compared to the same quarter one year ago, falling from $32.21 million to $15.44 million.
- Net operating cash flow has declined marginally to $133.81 million or 0.31% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CELLCOM ISRAEL LTD has marginally lower results.
- You can view the full Cellcom Israel Ratings Report.