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." Stag Industrial (NYSE: STAG) shares currently have a dividend yield of 5.50%. STAG Industrial, Inc. is a real estate investment trust. The firm invests in the real estate markets of United States. It is engaged in investment and management of real estate assets. STAG Industrial, Inc. was founded on July 21, 2010 and is based in Boston, Massachusetts. The average volume for Stag Industrial has been 414,100 shares per day over the past 30 days. Stag Industrial has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 17.5% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Stag Industrial as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 32.5%. 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 significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 351.6% when compared to the same quarter one year prior, rising from -$0.15 million to $0.39 million.
- Net operating cash flow has increased to $14.53 million or 15.49% when compared to the same quarter last year. Despite an increase in cash flow, STAG INDUSTRIAL INC's cash flow growth rate is still lower than the industry average growth rate of 29.62%.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, STAG INDUSTRIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for STAG INDUSTRIAL INC is currently extremely low, coming in at 14.18%. Regardless of STAG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, STAG's net profit margin of 0.96% is significantly lower than the industry average.
- You can view the full Stag Industrial Ratings Report.