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." CenturyLink (NYSE: CTL) shares currently have a dividend yield of 5.70%. CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The company operates through four segments: Consumer, Business, Wholesale, and Data Hosting. The average volume for CenturyLink has been 5,246,400 shares per day over the past 30 days. CenturyLink has a market cap of $21.5 billion and is part of the telecommunications industry. Shares are up 19.4% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates CenturyLink as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 0.6%. 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 gross profit margin for CENTURYLINK INC is rather high; currently it is at 57.45%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.47% trails the industry average.
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 31.9% when compared to the same quarter one year ago, falling from $298.00 million to $203.00 million.
- Net operating cash flow has declined marginally to $1,380.00 million or 0.50% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CENTURYLINK INC has marginally lower results.
- You can view the full CenturyLink Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 38.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for ENERPLUS CORP is rather high; currently it is at 67.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.67% is above that of the industry average.
- The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.42 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Powered by its strong earnings growth of 733.33% and other important driving factors, this stock has surged by 41.29% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- Net operating cash flow has decreased to $140.41 million or 12.91% 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 Enerplus Ratings Report.
- RPAI's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 12.4%. 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 851.5% when compared to the same quarter one year prior, rising from -$1.88 million to $14.13 million.
- RETAIL PPTYS OF AMERICA INC 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, RETAIL PPTYS OF AMERICA INC reported poor results of -$0.21 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.03 versus -$0.21).
- The gross profit margin for RETAIL PPTYS OF AMERICA INC is currently lower than what is desirable, coming in at 27.57%. Regardless of RPAI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RPAI's net profit margin of 9.54% 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, RETAIL PPTYS OF AMERICA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Retail Properties of America Ratings Report.
- Our dividend calendar.