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."World Wrestling Entertainment (NYSE: WWE) shares currently have a dividend yield of 4.30%. World Wrestling Entertainment, Inc., an integrated media and entertainment company, is engaged in the sports entertainment business worldwide. It operates in four segments: Live and Televised Entertainment, Consumer Products, Digital Media, and WWE Studios. The average volume for World Wrestling Entertainment has been 2,344,000 shares per day over the past 30 days. World Wrestling Entertainment has a market cap of $370.3 million and is part of the media industry. Shares are down 33.9% year-to-date as of the close of trading on Monday. TheStreet Ratings rates World Wrestling Entertainment as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- WWE's revenue growth trails the industry average of 14.9%. Since the same quarter one year prior, revenues slightly increased by 4.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- WWE's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, WWE has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for WORLD WRESTLING ENTMT INC is currently lower than what is desirable, coming in at 28.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -6.36% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$9.40 million or 59.40% 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 World Wrestling Entertainment Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.9%. Since the same quarter one year prior, revenues slightly increased by 3.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 47.09% is the gross profit margin for ENSCO PLC which we consider to be strong. Regardless of ESV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ESV's net profit margin of 24.64% significantly outperformed against the industry.
- Net operating cash flow has increased to $416.60 million or 21.70% when compared to the same quarter last year. Despite an increase in cash flow, ENSCO PLC's cash flow growth rate is still lower than the industry average growth rate of 49.68%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ESV has underperformed the S&P 500 Index, declining 18.52% 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.
- 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 Energy Equipment & Services industry. The net income has decreased by 7.8% when compared to the same quarter one year ago, dropping from $317.10 million to $292.50 million.
- You can view the full Ensco Ratings Report.
- FE's revenue growth has slightly outpaced the industry average of 9.2%. Since the same quarter one year prior, revenues rose by 12.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the Electric Utilities industry average, but is less than that of the S&P 500. The net income increased by 6.1% when compared to the same quarter one year prior, going from $196.00 million to $208.00 million.
- FIRSTENERGY CORP's earnings per share declined by 37.0% in the most recent quarter compared to the same quarter a year ago. 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, FIRSTENERGY CORP reported lower earnings of $0.90 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $0.90).
- The gross profit margin for FIRSTENERGY CORP is rather low; currently it is at 16.69%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 4.96% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$92.00 million or 284.00% 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 FirstEnergy Ratings Report.
- Our dividend calendar.