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." World Wrestling Entertainment (NYSE: WWE) shares currently have a dividend yield of 4.30%. World Wrestling Entertainment, Inc., an integrated media and entertainment company, is engaged in the sports entertainment business worldwide. It operates in four segments: Live and Televised Entertainment, Consumer Products, Digital Media, and WWE Studios. The average volume for World Wrestling Entertainment has been 2,590,200 shares per day over the past 30 days. World Wrestling Entertainment has a market cap of $370.6 million and is part of the media industry. Shares are down 32.1% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates World Wrestling Entertainment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. 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:
- WWE's revenue growth trails the industry average of 14.9%. Since the same quarter one year prior, revenues slightly increased by 4.1%. 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.
- WWE's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, WWE has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The gross profit margin for WORLD WRESTLING ENTMT INC is currently lower than what is desirable, coming in at 32.22%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -6.39% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$9.37 million or 58.94% 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 World Wrestling Entertainment Ratings Report.