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 "Buy." PDL BioPharma (NASDAQ: PDLI) shares currently have a dividend yield of 7.00%. PDL BioPharma, Inc. engages in intellectual property asset management and patent portfolio and related assets investment activities. The company has a P/E ratio of 5.15. The average volume for PDL BioPharma has been 2,654,300 shares per day over the past 30 days. PDL BioPharma has a market cap of $1.4 billion and is part of the drugs industry. Shares are up 1.3% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates PDL BioPharma as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, solid stock price performance, growth in earnings per share, revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- Compared to other companies in the Biotechnology industry and the overall market, PDL BIOPHARMA INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- PDL BIOPHARMA INC has improved earnings per share by 12.5% 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 two years. We feel that this trend should continue. During the past fiscal year, PDL BIOPHARMA INC increased its bottom line by earning $1.47 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.47).
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.8%. Since the same quarter one year prior, revenues rose by 14.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for PDL BIOPHARMA INC is currently very high, coming in at 91.86%. Regardless of PDLI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PDLI's net profit margin of 57.77% significantly outperformed against the industry.
- You can view the full PDL BioPharma Ratings Report.
- Net operating cash flow has significantly increased by 60.47% to $1,072.00 million when compared to the same quarter last year. In addition, ROGERS COMMUNICATIONS has also vastly surpassed the industry average cash flow growth rate of -0.61%.
- 35.34% is the gross profit margin for ROGERS COMMUNICATIONS which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RCI's net profit margin of 9.86% significantly trails the industry average.
- RCI, with its decline in revenue, slightly underperformed the industry average of 8.3%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Wireless Telecommunication Services industry and the overall market, ROGERS COMMUNICATIONS's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The share price of ROGERS COMMUNICATIONS has not done very well: it is down 19.02% 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, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Rogers Communications Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.8%. Since the same quarter one year prior, revenues rose by 29.5%. 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CVR ENERGY INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Net operating cash flow has significantly increased by 660.95% to $118.80 million when compared to the same quarter last year. In addition, CVR ENERGY INC has also vastly surpassed the industry average cash flow growth rate of -52.18%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 154.34% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full CVR Energy Ratings Report.
- Our dividend calendar.