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 "Sell." Aviv REIT (NYSE: AVIV) shares currently have a dividend yield of 5.00%. No company description available. The company has a P/E ratio of 27.65. The average volume for Aviv REIT has been 351,500 shares per day over the past 30 days. Aviv REIT has a market cap of $1.4 billion and is part of the real estate industry. Shares are up 20.4% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Aviv REIT as a sell. The area that we feel has been the company's primary weakness has been its relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- 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. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AVIV REIT INC's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for AVIV REIT INC is rather high; currently it is at 58.66%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 20.94% trails the industry average.
- Net operating cash flow has significantly increased by 4612.22% to $16.24 million when compared to the same quarter last year. In addition, AVIV REIT INC has also vastly surpassed the industry average cash flow growth rate of 29.99%.
- You can view the full Aviv REIT Ratings Report.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 100.1% when compared to the same quarter one year ago, falling from -$5.38 million to -$10.76 million.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, ATLAS RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- ARP's debt-to-equity ratio of 0.81 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.33 is very low and demonstrates very weak liquidity.
- The share price of ATLAS RESOURCE PARTNERS LP has not done very well: it is down 14.24% 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.
- ATLAS RESOURCE PARTNERS LP 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, ATLAS RESOURCE PARTNERS LP reported poor results of -$1.88 versus -$1.63 in the prior year. This year, the market expects an improvement in earnings (-$0.34 versus -$1.88).
- You can view the full Atlas Resource Partners Ratings Report.
- 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, PENN WEST PETROLEUM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $232.00 million or 9.37% 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.
- PENN WEST PETROLEUM LTD reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PENN WEST PETROLEUM LTD swung to a loss, reporting -$1.71 versus $0.37 in the prior year.
- PWE has underperformed the S&P 500 Index, declining 5.06% from its price level of one year ago. 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- You can view the full Penn West Petroleum Ratings Report.
- Our dividend calendar.