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." Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.30%. Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 96.71. The average volume for Mid-America Apartment Communities has been 491,700 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $5.0 billion and is part of the real estate industry. Shares are up 10.4% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Mid-America Apartment Communities as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and disappointing return on equity. Highlights from the ratings report include:
- MAA's very impressive revenue growth greatly exceeded the industry average of 6.8%. Since the same quarter one year prior, revenues leaped by 90.5%. 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.
- Net operating cash flow has significantly increased by 80.00% to $95.82 million when compared to the same quarter last year. In addition, MID-AMERICA APT CMNTYS INC has also vastly surpassed the industry average cash flow growth rate of 10.27%.
- In its most recent trading session, MAA 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. 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.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, MID-AMERICA APT CMNTYS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for MID-AMERICA APT CMNTYS INC is rather low; currently it is at 17.68%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -3.86% is significantly below that of the industry average.
- You can view the full Mid-America Apartment Communities Ratings Report.
- HCN's very impressive revenue growth greatly exceeded the industry average of 6.8%. Since the same quarter one year prior, revenues leaped by 57.7%. 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 increased to $362.59 million or 42.38% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.27%.
- HEALTH CARE REIT INC 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, HEALTH CARE REIT INC reported lower earnings of $0.09 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus $0.09).
- The gross profit margin for HEALTH CARE REIT INC is rather low; currently it is at 20.60%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 3.57% significantly trails the industry average.
- The share price of HEALTH CARE REIT INC has not done very well: it is down 13.33% 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Health Care REIT Ratings Report.
- The revenue growth came in higher than the industry average of 11.7%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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 BANK OF MONTREAL is currently very high, coming in at 84.49%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.91% is above that of the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 2.9% when compared to the same quarter one year prior, going from $1,018.00 million to $1,048.00 million.
- 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 Commercial Banks industry and the overall market on the basis of return on equity, BANK OF MONTREAL has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $9,269.00 million or 13.01% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Bank of Montreal Ratings Report.
- Our dividend calendar.