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." Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 4.70%. Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The average volume for Healthcare Realty has been 536,700 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.5 billion and is part of the real estate industry. Shares are up 18.2% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Healthcare Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- HR's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 14.3%. 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 significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 485.6% when compared to the same quarter one year prior, rising from -$1.00 million to $3.85 million.
- HEALTHCARE REALTY TRUST 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, HEALTHCARE REALTY TRUST INC swung to a loss, reporting -$0.15 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus -$0.15).
- The gross profit margin for HEALTHCARE REALTY TRUST INC is currently lower than what is desirable, coming in at 27.88%. Regardless of HR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HR's net profit margin of 4.18% is significantly lower than the industry average.
- 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, HEALTHCARE REALTY TRUST INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Healthcare Realty Ratings Report.
- 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 3.6%. 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 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.
- 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 35.9% when compared to the same quarter one year ago, falling from $14.65 million to $9.39 million.
- The gross profit margin for PIEDMONT OFFICE REALTY TRUST is rather low; currently it is at 18.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.90% significantly trails the industry average.
- You can view the full Piedmont Office Realty Ratings Report.
- Net operating cash flow has significantly increased by 88.77% to -$4.34 million when compared to the same quarter last year. In addition, AMERN EAGLE OUTFITTERS INC has also vastly surpassed the industry average cash flow growth rate of -3.54%.
- AEO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 1.00 is somewhat weak and could be cause for future problems.
- AEO, with its decline in revenue, slightly underperformed the industry average of 2.1%. Since the same quarter one year prior, revenues slightly dropped by 4.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Specialty Retail industry and the overall market, AMERN EAGLE OUTFITTERS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for AMERN EAGLE OUTFITTERS INC is currently lower than what is desirable, coming in at 34.95%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.59% trails that of the industry average.
- You can view the full American Eagle Outfitters Ratings Report.
- Our dividend calendar.