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." Brookfield Property Partners (NYSE: BPY) shares currently have a dividend yield of 4.80%. Brookfield Property Partners L.P. owns, operates, and invests in commercial properties in North America, Europe, Australia, and Brazil. The company has a P/E ratio of 9.98. The average volume for Brookfield Property Partners has been 1,010,600 shares per day over the past 30 days. Brookfield Property Partners has a market cap of $4.2 billion and is part of the real estate industry. Shares are up 4.1% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Brookfield Property Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and generally high debt management risk. Highlights from the ratings report include:
- BROOKFIELD PROPERTY PRTRS 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, 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 Management & Development industry. The net income has significantly decreased by 76.6% when compared to the same quarter one year ago, falling from $329.00 million to $77.00 million.
- The debt-to-equity ratio is very high at 4.78 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.39, which clearly demonstrates the inability to cover short-term cash needs.
- In its most recent trading session, BPY 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. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
- The gross profit margin for BROOKFIELD PROPERTY PRTRS LP is rather high; currently it is at 50.05%. Regardless of BPY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.29% trails the industry average.
- You can view the full Brookfield Property Partners Ratings Report.