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."UDR (NYSE: UDR) shares currently have a dividend yield of 4.10%. UDR, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It owns, operates, acquires, renovates, develops, redevelops, and manages multifamily apartment communities. The average volume for UDR has been 1,771,200 shares per day over the past 30 days. UDR has a market cap of $6.3 billion and is part of the real estate industry. Shares are up 10.6% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates UDR as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, revenue growth and growth in earnings per share. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- Compared to its price level of one year ago, UDR is up 5.90% to its most recent closing price of 25.46. Looking ahead, our view is that this company's fundamentals should not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- UDR's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 9.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $78.61 million or 9.28% when compared to the same quarter last year. Despite an increase in cash flow, UDR INC's average is still marginally south of the industry average growth rate of 10.27%.
- 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, UDR INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for UDR INC is rather low; currently it is at 16.61%. Regardless of UDR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.31% trails the industry average.
- You can view the full UDR Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 105.2% when compared to the same quarter one year prior, rising from $14.44 million to $29.62 million.
- 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 4.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PIEDMONT OFFICE REALTY TRUST 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PIEDMONT OFFICE REALTY TRUST increased its bottom line by earning $0.44 versus $0.36 in the prior year. For the next year, the market is expecting a contraction of 27.3% in earnings ($0.32 versus $0.44).
- The gross profit margin for PIEDMONT OFFICE REALTY TRUST is rather low; currently it is at 21.21%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 21.43% trails that of the industry average.
- Net operating cash flow has decreased to $46.73 million or 42.05% 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 Piedmont Office Realty Ratings Report.
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 29.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- PARKWAY PROPERTIES 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PARKWAY PROPERTIES INC continued to lose money by earning -$0.58 versus -$1.57 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$0.58).
- The gross profit margin for PARKWAY PROPERTIES INC is currently extremely low, coming in at 8.71%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, PKY's net profit margin of -10.86% significantly underperformed when compared to the industry average.
- Net operating cash flow has significantly decreased to -$9.08 million or 190.58% 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 Parkway Properties Ratings Report.
- Our dividend calendar.