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."Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 10.10%. Annaly Capital Management, Inc. owns a portfolio of real estate related investments in the United States. The company has a P/E ratio of 4.48. The average volume for Annaly Capital Management has been 10,647,500 shares per day over the past 30 days. Annaly Capital Management has a market cap of $11.2 billion and is part of the real estate industry. Shares are up 15.4% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Annaly Capital Management as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and attractive valuation levels. 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 exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 46.9% when compared to the same quarter one year prior, rising from $700.50 million to $1,028.75 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANNALY CAPITAL MANAGEMENT's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 93.44%. Regardless of NLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NLY's net profit margin of 119.86% significantly outperformed against the industry.
- NLY's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.35%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Net operating cash flow has significantly decreased to -$6,000.48 million or 1800.99% 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 Annaly Capital Management Ratings Report.
- HR's revenue growth has slightly outpaced the industry average of 8.4%. Since the same quarter one year prior, revenues rose by 14.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 485.6% when compared to the same quarter one year prior, rising from -$1.00 million to $3.85 million.
- HR has underperformed the S&P 500 Index, declining 17.43% from its price level of one year ago.
- The gross profit margin for HEALTHCARE REALTY TRUST INC is currently lower than what is desirable, coming in at 27.88%. Regardless of HR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HR's net profit margin of 4.18% is significantly lower than the industry average.
- 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, HEALTHCARE REALTY TRUST INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Healthcare Realty Ratings Report.
- The gross profit margin for PHILIP MORRIS INTERNATIONAL is rather high; currently it is at 68.41%. Regardless of PM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PM's net profit margin of 27.10% compares favorably to the industry average.
- PM, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- PHILIP MORRIS INTERNATIONAL's earnings per share declined by 7.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PHILIP MORRIS INTERNATIONAL increased its bottom line by earning $5.26 versus $5.18 in the prior year. For the next year, the market is expecting a contraction of 1.5% in earnings ($5.18 versus $5.26).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Tobacco industry. The net income has decreased by 11.8% when compared to the same quarter one year ago, dropping from $2,125.00 million to $1,875.00 million.
- Net operating cash flow has decreased to $715.00 million or 47.54% 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 Philip Morris International Ratings Report.
- Our dividend calendar.