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."Capstead Mortgage (NYSE: CMO) shares currently have a dividend yield of 10.40%. Capstead Mortgage Corporation operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 13.21. The average volume for Capstead Mortgage has been 996,600 shares per day over the past 30 days. Capstead Mortgage has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 8.9% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Capstead Mortgage as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- The net income growth from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 9.9% when compared to the same quarter one year prior, going from $34.92 million to $38.39 million.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Capstead Mortgage Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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.
- Net operating cash flow has slightly increased to $78.48 million or 3.73% when compared to the same quarter last year. Despite an increase in cash flow, HOME PROPERTIES INC's cash flow growth rate is still lower than the industry average growth rate of 27.25%.
- The gross profit margin for HOME PROPERTIES INC is currently lower than what is desirable, coming in at 28.53%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 27.24% is above that of the industry average.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has decreased by 11.7% when compared to the same quarter one year ago, dropping from $51.88 million to $45.79 million.
- You can view the full Home Properties Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 72.1% when compared to the same quarter one year prior, rising from -$28.48 million to -$7.93 million.
- Net operating cash flow has significantly increased by 204.79% to $25.19 million when compared to the same quarter last year. In addition, CYPRESS SEMICONDUCTOR CORP has also vastly surpassed the industry average cash flow growth rate of 4.26%.
- CYPRESS SEMICONDUCTOR CORP 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, CYPRESS SEMICONDUCTOR CORP reported poor results of -$0.33 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.53 versus -$0.33).
- CY has underperformed the S&P 500 Index, declining 12.70% 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 debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, CY has a quick ratio of 0.69, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Cypress Semiconductor Ratings Report.
- Our dividend calendar.