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." BioMed Realty (NYSE: BMR) shares currently have a dividend yield of 4.80%. BioMed Realty Trust, Inc. operates as a real estate investment trust (REIT) that focuses on providing real estate to the life science industry in the United States. The company has a P/E ratio of 103.45. The average volume for BioMed Realty has been 1,284,100 shares per day over the past 30 days. BioMed Realty has a market cap of $4.0 billion and is part of the real estate industry. Shares are up 13.6% year-to-date as of the close of trading on Monday. TheStreet Ratings rates BioMed Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- BMR's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 10.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- BIOMED REALTY TRUST INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, BIOMED REALTY TRUST INC increased its bottom line by earning $0.20 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus $0.20).
- In its most recent trading session, BMR 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for BIOMED REALTY TRUST INC is rather low; currently it is at 20.81%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.75% significantly trails the industry average.
- You can view the full BioMed Realty Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 0.4%. 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 Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 13.5% when compared to the same quarter one year prior, going from $69.22 million to $78.56 million.
- MFA has underperformed the S&P 500 Index, declining 13.18% 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.
- Net operating cash flow has declined marginally to $70.96 million or 8.78% when compared to the same quarter last year. Despite a decrease in cash flow of 8.78%, MFA FINANCIAL INC is still significantly exceeding the industry average of -76.73%.
- You can view the full MFA Financial Ratings Report.
- Net operating cash flow has increased to $448.10 million or 10.15% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.22%.
- The gross profit margin for WINDSTREAM HOLDINGS INC is rather high; currently it is at 53.62%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WIN's net profit margin of 2.03% significantly trails the industry average.
- 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 Diversified Telecommunication Services industry and the overall market on the basis of return on equity, WINDSTREAM HOLDINGS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The debt-to-equity ratio is very high at 10.35 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, WIN has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- The share price of WINDSTREAM HOLDINGS INC has not done very well: it is down 7.02% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- You can view the full Windstream Holdings Ratings Report.
- Our dividend calendar.