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."Dupont Fabros Technology (NYSE: DFT) shares currently have a dividend yield of 5.90%. DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company has a P/E ratio of 77.88. The average volume for Dupont Fabros Technology has been 669,600 shares per day over the past 30 days. Dupont Fabros Technology has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 1.7% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Dupont Fabros Technology as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- DFT's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 15.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DUPONT FABROS TECHNOLOGY 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DUPONT FABROS TECHNOLOGY INC reported lower earnings of $0.32 versus $0.41 in the prior year. This year, the market expects an improvement in earnings ($1.17 versus $0.32).
- In its most recent trading session, DFT 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 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, DUPONT FABROS TECHNOLOGY INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Dupont Fabros Technology Ratings Report.
- Net operating cash flow has slightly increased to $152.50 million or 2.28% when compared to the same quarter last year. In addition, TECO ENERGY INC has also modestly surpassed the industry average cash flow growth rate of -2.74%.
- Despite the stagnant revenue growth, the company outperformed against the industry average of 2.8%. Since the same quarter one year prior, revenues have remained constant. Even though the company's revenue remained stagnant, the earnings per share decreased.
- TECO ENERGY INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, TECO ENERGY INC reported lower earnings of $0.92 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.01 versus $0.92).
- 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 Multi-Utilities industry. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from $45.10 million to $42.00 million.
- In its most recent trading session, TE 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full TECO Energy Ratings Report.
- LNCO 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. To add to this, LNCO has a quick ratio of 2.22, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for LINNCO LLC is currently very high, coming in at 100.00%. LNCO has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, LNCO's net profit margin of 330.80% significantly outperformed against the industry.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.42%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 3075.40% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 4480.9% when compared to the same quarter one year ago, falling from $21.16 million to -$926.97 million.
- You can view the full LinnCo Ratings Report.
- Our dividend calendar.