Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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 which could 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."PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 9.80%. PennyMac Mortgage Investment Trust, a specialty finance company, through its subsidiaries, invests primarily in residential mortgage loans and mortgage-related assets. The company operates in two segments, Correspondent Lending and Investment Activities. The company has a P/E ratio of 8.10. The average volume for PennyMac Mortgage Investment has been 733,400 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.7 billion and is part of the real estate industry. Shares are up 4.4% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates PennyMac Mortgage Investment as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for PENNYMAC MORTGAGE INVEST TR is rather high; currently it is at 64.48%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 45.25% significantly outperformed against the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, PENNYMAC MORTGAGE INVEST TR has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PMT has underperformed the S&P 500 Index, declining 6.47% 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.
- PENNYMAC MORTGAGE INVEST TR's earnings per share declined by 16.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, PENNYMAC MORTGAGE INVEST TR reported lower earnings of $3.02 versus $3.08 in the prior year. For the next year, the market is expecting a contraction of 2.3% in earnings ($2.95 versus $3.02).
- You can view the full PennyMac Mortgage Investment Ratings Report.
- NUSTAR ENERGY LP 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. 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, NUSTAR ENERGY LP continued to lose money by earning -$2.99 versus -$3.05 in the prior year. This year, the market expects an improvement in earnings ($1.96 versus -$2.99).
- NS, with its decline in revenue, underperformed when compared the industry average of 7.8%. Since the same quarter one year prior, revenues fell by 20.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, NS 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.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NUSTAR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 3368.6% when compared to the same quarter one year ago, falling from -$10.62 million to -$368.33 million.
- You can view the full NuStar Energy L.P Ratings Report.
- NTRI's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 11.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 122.22% and other important driving factors, this stock has surged by 87.87% 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.
- NTRI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.72 is somewhat weak and could be cause for future problems.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market on the basis of return on equity, NUTRISYSTEM INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 47.74% is the gross profit margin for NUTRISYSTEM INC which we consider to be strong. Regardless of NTRI'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 1.85% trails the industry average.
- You can view the full NutriSystem Ratings Report.
- Our dividend calendar.