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."WGL Holdings (NYSE: WGL) shares currently have a dividend yield of 4.40%. WGL Holdings, Inc., through its subsidiaries, sells and delivers natural gas, and provides energy-related products and services. The company operates in four segments: Regulated Utility, Retail Energy-Marketing, Commercial Energy Systems, and Midstream Energy Services. The company has a P/E ratio of 44.70. The average volume for WGL Holdings has been 352,700 shares per day over the past 30 days. WGL Holdings has a market cap of $2.1 billion and is part of the utilities industry. Shares are down 1.3% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates WGL Holdings as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has increased to -$12.61 million or 25.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.12%.
- The debt-to-equity ratio is somewhat low, currently at 0.82, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.36 is very weak and demonstrates a lack of ability to pay short-term obligations.
- WGL, with its decline in revenue, underperformed when compared the industry average of 16.0%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Gas Utilities industry and the overall market on the basis of return on equity, WGL HOLDINGS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for WGL HOLDINGS INC is currently extremely low, coming in at 8.83%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.78% trails that of the industry average.
- You can view the full WGL Holdings Ratings Report.
- NYMT's very impressive revenue growth greatly exceeded the industry average of 6.7%. Since the same quarter one year prior, revenues leaped by 95.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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, NEW YORK MORTGAGE TRUST INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- NEW YORK MORTGAGE TRUST INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NEW YORK MORTGAGE TRUST INC reported lower earnings of $1.11 versus $1.25 in the prior year. For the next year, the market is expecting a contraction of 15.8% in earnings ($0.94 versus $1.11).
- The gross profit margin for NEW YORK MORTGAGE TRUST INC is currently lower than what is desirable, coming in at 28.56%. Regardless of NYMT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NYMT's net profit margin of 23.68% compares favorably to the industry average.
- You can view the full New York Mortgage Ratings Report.
- The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 10.8%. 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.
- Net operating cash flow has significantly increased by 89.13% to $269.90 million when compared to the same quarter last year. In addition, ENBRIDGE ENERGY PRTNRS -LP has also vastly surpassed the industry average cash flow growth rate of -23.54%.
- ENBRIDGE ENERGY PRTNRS -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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ENBRIDGE ENERGY PRTNRS -LP swung to a loss, reporting -$0.38 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($0.94 versus -$0.38).
- The gross profit margin for ENBRIDGE ENERGY PRTNRS -LP is currently lower than what is desirable, coming in at 27.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.46% trails that of the industry average.
- 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 83.2% when compared to the same quarter one year ago, falling from $54.30 million to $9.10 million.
- You can view the full Enbridge Energy Partners Ratings Report.
- Our dividend calendar.