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." Icahn (NASDAQ: IEP) shares currently have a dividend yield of 5.90%. Icahn Enterprises L.P. is engaged in the investment, automotive, energy, metals, railcar, gaming, food packaging, real estate, and home fashion businesses in the United States and Internationally. The company has a P/E ratio of 16.15. The average volume for Icahn has been 172,000 shares per day over the past 30 days. Icahn has a market cap of $12.1 billion and is part of the conglomerates industry. Shares are down 6.5% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Icahn as a hold. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and disappointing return on equity. Highlights from the ratings report include:
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- ICAHN ENTERPRISES LP 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, ICAHN ENTERPRISES LP increased its bottom line by earning $8.98 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($9.41 versus $8.98).
- IEP, with its decline in revenue, underperformed when compared the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 8.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has significantly decreased to -$802.00 million or 2056.09% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Auto Components industry. The net income has significantly decreased by 110.5% when compared to the same quarter one year ago, falling from $277.00 million to -$29.00 million.
- You can view the full Icahn Ratings Report.