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.
- The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 82.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 45.28% significantly outperformed against the industry average.
- 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. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, EL PASO PIPELINE PARTNERS LP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- 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 1.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The debt-to-equity ratio is very high at 2.15 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, EPB maintains a poor quick ratio of 0.77, which illustrates the inability to avoid short-term cash problems.
- Net operating cash flow has declined marginally to $257.00 million or 6.88% 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.
- You can view the full El Paso Pipeline Partners Ratings Report.
- The revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 47.8%. 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.
- Compared to its closing price of one year ago, NRF's share price has jumped by 97.66%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Net operating cash flow has increased to $53.70 million or 25.82% when compared to the same quarter last year. Despite an increase in cash flow, NORTHSTAR REALTY FINANCE CP's average is still marginally south of the industry average growth rate of 29.99%.
- 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, NORTHSTAR REALTY FINANCE CP's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 348.9% when compared to the same quarter one year ago, falling from $47.96 million to -$119.37 million.
- You can view the full Northstar Realty Finance Ratings Report.
- Our dividend calendar.