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." Telefonica Brasil (NYSE: VIV) shares currently have a dividend yield of 7.80%. Telefonica Brasil S.A. provides fixed-line telecommunications services to residential and commercial customers in Brazil. The company has a P/E ratio of 6.48. The average volume for Telefonica Brasil has been 1,807,900 shares per day over the past 30 days. Telefonica Brasil has a market cap of $22.4 billion and is part of the telecommunications industry. Shares are up 4.2% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Telefonica Brasil as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- 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 3.3%. 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 to the industry average, the firm's growth rate is much lower.
- You can view the full Telefonica Brasil Ratings Report.
- RESI's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 4818.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 692.30% and other important driving factors, this stock has surged by 47.30% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although RESI had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ALTISOURCE RESIDENTIAL CORP's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$23.57 million or 1627.78% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Altisource Residential Corporation Ratings Report.
- ATLS's very impressive revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues leaped by 66.5%. 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.
- Net operating cash flow has significantly increased by 97.96% to -$0.44 million when compared to the same quarter last year. In addition, ATLAS ENERGY LP has also vastly surpassed the industry average cash flow growth rate of 17.46%.
- ATLAS ENERGY LP's earnings per share declined by 8.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ATLAS ENERGY LP reported poor results of -$1.48 versus -$1.02 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus -$1.48).
- The debt-to-equity ratio is very high at 8.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, ATLS has a quick ratio of 0.60, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ATLAS ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Atlas Energy Ratings Report.
- Our dividend calendar.