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."Sabra Health Care REIT (NASDAQ: SBRA) shares currently have a dividend yield of 5.30%. Sabra Health Care REIT, Inc. operates as a real estate investment trust in the United States. The company, through its subsidiaries, owns and invests in real estate properties for the healthcare industry. The company has a P/E ratio of 156.67. The average volume for Sabra Health Care REIT has been 516,300 shares per day over the past 30 days. Sabra Health Care REIT has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 8.1% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Sabra Health Care REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 27.6%. 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.
- The gross profit margin for SABRA HEALTH CARE REIT INC is rather high; currently it is at 62.78%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -17.87% is in-line with the industry average.
- SABRA HEALTH CARE REIT INC 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. 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, SABRA HEALTH CARE REIT INC increased its bottom line by earning $0.67 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.67).
- 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 176.4% when compared to the same quarter one year ago, falling from $9.56 million to -$7.30 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, SABRA HEALTH CARE REIT INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Sabra Health Care REIT Ratings Report.
- LNCO 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. Along with this, the company maintains a quick ratio of 18.09, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 269.64% to $93.23 million when compared to the same quarter last year. In addition, LINNCO LLC has also vastly surpassed the industry average cash flow growth rate of 17.51%.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from -$18.22 million to -$19.48 million.
- LNCO has underperformed the S&P 500 Index, declining 17.50% 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.
- You can view the full LinnCo Ratings Report.
- SUN COMMUNITIES INC has improved earnings per share by 10.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SUN COMMUNITIES INC increased its bottom line by earning $0.32 versus $0.20 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus $0.32).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 29.0% when compared to the same quarter one year prior, rising from $7.26 million to $9.36 million.
- In its most recent trading session, SUI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The gross profit margin for SUN COMMUNITIES INC is currently lower than what is desirable, coming in at 26.28%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.38% significantly trails the industry average.
- You can view the full Sun Communities Ratings Report.
- Our dividend calendar.