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." Corporate Office Properties (NYSE: OFC) shares currently have a dividend yield of 4.20%. Corporate Office Properties Trust, a real estate investment trust (REIT), engages in the acquisition, development, ownership, management, and leasing of suburban office properties. The company has a P/E ratio of 124.52. The average volume for Corporate Office Properties has been 621,300 shares per day over the past 30 days. Corporate Office Properties has a market cap of $2.3 billion and is part of the real estate industry. Shares are up 10.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Corporate Office Properties as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 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 369.4% when compared to the same quarter one year prior, rising from $18.54 million to $87.02 million.
- CORP OFFICE PPTYS TR INC reported flat earnings per share in the most recent quarter. 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, CORP OFFICE PPTYS TR INC turned its bottom line around by earning $0.21 versus -$0.21 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus $0.21).
- OFC has underperformed the S&P 500 Index, declining 5.04% 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.
- Net operating cash flow has declined marginally to $51.97 million or 0.36% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Corporate Office Properties Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 172.1% when compared to the same quarter one year prior, rising from $78.06 million to $212.38 million.
- SPLS's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that SPLS's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.
- The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 27.39%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.61% trails that of the industry average.
- Net operating cash flow has decreased to $233.15 million or 28.13% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, STAPLES INC has marginally lower results.
- You can view the full Staples 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 179.3% when compared to the same quarter one year prior, rising from -$26.21 million to $20.79 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 0.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has slightly increased to $37.26 million or 6.02% when compared to the same quarter last year. Despite an increase in cash flow, BRANDYWINE REALTY TRUST's average is still marginally south of the industry average growth rate of 10.27%.
- In its most recent trading session, BDN 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.
- The gross profit margin for BRANDYWINE REALTY TRUST is rather low; currently it is at 20.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 14.93% trails that of the industry average.
- You can view the full Brandywine Realty Ratings Report.
- Our dividend calendar.