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."CTC Media (NASDAQ: CTCM) shares currently have a dividend yield of 7.40%. CTC Media, Inc., together with its subsidiaries, operates as an independent media company in Russia and other CIS markets. The company has a P/E ratio of 9.70. The average volume for CTC Media has been 659,200 shares per day over the past 30 days. CTC Media has a market cap of $1.5 billion and is part of the media industry. Shares are down 31.9% year-to-date as of the close of trading on Monday. TheStreet Ratings rates CTC Media as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- CTCM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Media industry and the overall market, CTC MEDIA INC's return on equity exceeds that of both the industry average and the S&P 500.
- CTCM, with its decline in revenue, slightly underperformed the industry average of 4.0%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of CTC MEDIA INC has not done very well: it is down 17.13% 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. 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, 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 Media industry. The net income has significantly decreased by 29.9% when compared to the same quarter one year ago, falling from $64.88 million to $45.50 million.
- You can view the full CTC Media Ratings Report.
- NISKA GAS STORAGE PARTNERS 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. 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, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.63 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($0.53 versus -$0.63).
- NKA, with its very weak revenue results, has greatly underperformed against the industry average of 7.8%. Since the same quarter one year prior, revenues plummeted by 65.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing 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 Oil, Gas & Consumable Fuels industry and the overall market, NISKA GAS STORAGE PARTNERS's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.41 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, NKA has a quick ratio of 0.54, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 228.7% when compared to the same quarter one year ago, falling from $10.42 million to -$13.41 million.
- You can view the full Niska Gas Storage Partners Ratings Report.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 32.65% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- SMTP INC has improved earnings per share by 20.0% 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. During the past fiscal year, SMTP INC increased its bottom line by earning $0.42 versus $0.35 in the prior year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Internet Software & Services industry average. The net income increased by 28.6% when compared to the same quarter one year prior, rising from $0.31 million to $0.40 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 16.1%. Since the same quarter one year prior, revenues rose by 14.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- You can view the full SMTP Ratings Report.
- Our dividend calendar.