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."Washington REIT (NYSE: WRE) shares currently have a dividend yield of 4.50%. Washington Real Estate Investment Trust is an equity real estate investment trust (REIT). The company engages in the ownership, operation, and development of real properties. The firm invests in real estate markets of the greater Washington D.C. metro region. The average volume for Washington REIT has been 353,600 shares per day over the past 30 days. Washington REIT has a market cap of $1.8 billion and is part of the real estate industry. Shares are up 12.4% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Washington REIT as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- 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 1342.4% when compared to the same quarter one year prior, rising from $7.23 million to $104.27 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 6.2%. 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.
- WASHINGTON REIT has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, WASHINGTON REIT reported lower earnings of $0.00 versus $0.12 in the prior year. This year, the market expects an increase in earnings to $1.70 from $0.00.
- Net operating cash flow has decreased to $22.49 million or 39.07% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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, WASHINGTON REIT's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Washington REIT Ratings Report.
- BXMT's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 2211.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for BLACKSTONE MORTGAGE TR INC is currently very high, coming in at 80.40%. It has increased significantly from the same period last year. Along with this, the net profit margin of 38.81% significantly outperformed against the industry average.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- BLACKSTONE MORTGAGE TR 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, BLACKSTONE MORTGAGE TR INC swung to a loss, reporting -$0.25 versus $73.00 in the prior year. This year, the market expects an improvement in earnings ($1.94 versus -$0.25).
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, BLACKSTONE MORTGAGE TR INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Blackstone Mortgage Ratings Report.
- The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 22.9%. 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 exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income increased by 45.6% when compared to the same quarter one year prior, rising from $80.34 million to $116.99 million.
- The gross profit margin for ARES CAPITAL CORP is currently very high, coming in at 71.00%. Regardless of ARCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARCC's net profit margin of 48.80% significantly outperformed against the industry.
- ARES CAPITAL CORP has improved earnings per share by 21.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARES CAPITAL CORP reported lower earnings of $1.81 versus $2.20 in the prior year. For the next year, the market is expecting a contraction of 13.8% in earnings ($1.56 versus $1.81).
- 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. When compared to other companies in the Capital Markets industry and the overall market, ARES CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ares Capital Corporation Ratings Report.
- Our dividend calendar.