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."LinnCo (NASDAQ: LNCO) shares currently have a dividend yield of 10.30%. LinnCo, LLC, through its limited liability company interests in Linn Energy, LLC, focuses on the acquisition and development of oil and natural gas properties in the United States. The company was founded in 2012 and is headquartered in Houston, Texas. The average volume for LinnCo has been 1,253,400 shares per day over the past 30 days. LinnCo has a market cap of $3.6 billion and is part of the energy industry. Shares are down 7.7% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates LinnCo as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- LNCO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 18.09, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 269.64% to $93.23 million when compared to the same quarter last year. In addition, LINNCO LLC has also vastly surpassed the industry average cash flow growth rate of 17.46%.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from -$18.22 million to -$19.48 million.
- LNCO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.97%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full LinnCo Ratings Report.
- Net operating cash flow has significantly increased by 2327.34% to $456.25 million when compared to the same quarter last year. In addition, TWO HARBORS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 29.62%.
- The gross profit margin for TWO HARBORS INVESTMENT CORP is rather high; currently it is at 69.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TWO's net profit margin of -28.36% significantly underperformed when compared to the industry average.
- The share price of TWO HARBORS INVESTMENT CORP has not done very well: it is down 7.75% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 120.3% when compared to the same quarter one year ago, falling from $143.72 million to -$29.15 million.
- You can view the full Two Harbors Investment Ratings Report.
- HTA's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HEALTHCARE TRUST OF AMERICA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HEALTHCARE TRUST OF AMERICA turned its bottom line around by earning $0.11 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus $0.11).
- Net operating cash flow has increased to $33.45 million or 19.73% when compared to the same quarter last year. Despite an increase in cash flow, HEALTHCARE TRUST OF AMERICA's average is still marginally south of 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 on the basis of return on equity, HEALTHCARE TRUST OF AMERICA underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for HEALTHCARE TRUST OF AMERICA is rather low; currently it is at 21.38%. Regardless of HTA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HTA's net profit margin of 5.79% is significantly lower than the industry average.
- You can view the full Healthcare Trust of America Ratings Report.
- Our dividend calendar.