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."Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.80%. Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The average volume for Healthcare Realty has been 499,800 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.4 billion and is part of the real estate industry. Shares are up 17.4% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Healthcare Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- HR's revenue growth has slightly outpaced the industry average of 10.1%. 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 14.47% 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.
- VIV's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
- VIV, with its decline in revenue, underperformed when compared the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 9.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, TELEFONICA BRASIL SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has decreased to $563.59 million or 48.95% 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 Telefonica Brasil Ratings Report.
- 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 Diversified Telecommunication Services industry and the overall market on the basis of return on equity, TELEFONICA SA has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Although TEF's debt-to-equity ratio of 2.61 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, TEF maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for TELEFONICA SA is currently lower than what is desirable, coming in at 30.12%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.65% trails that of the industry average.
- You can view the full Telefonica Ratings Report.
- Our dividend calendar.