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." Education Realty (NYSE: EDR) shares currently have a dividend yield of 4.10%. Education Realty Trust, Inc., a real estate investment trust (REIT), develops, acquires, owns, and manages student housing communities located near university campuses in the United States. The company has a P/E ratio of 97.27. The average volume for Education Realty has been 1,438,900 shares per day over the past 30 days. Education Realty has a market cap of $1.2 billion and is part of the real estate industry. Shares are up 21.8% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Education Realty as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins 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 21.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- EDUCATION REALTY TRUST INC reported significant earnings per share improvement 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, EDUCATION REALTY TRUST INC turned its bottom line around by earning $0.05 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus $0.05).
- 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. 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 EDUCATION REALTY TRUST INC is rather low; currently it is at 15.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 22.10% trails that of the industry average.
- Net operating cash flow has decreased to $17.18 million or 13.47% 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 Education Realty Ratings Report.
- Compared to its closing price of one year ago, IEP's share price has jumped by 37.69%, 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.
- ICAHN ENTERPRISES 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. 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, ICAHN ENTERPRISES LP increased its bottom line by earning $8.98 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($9.41 versus $8.98).
- The gross profit margin for ICAHN ENTERPRISES LP is rather low; currently it is at 20.18%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -0.58% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$802.00 million or 2056.09% 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 Icahn Ratings Report.
- ATLS's very impressive revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues leaped by 66.5%. 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.
- Net operating cash flow has significantly increased by 97.96% to -$0.44 million when compared to the same quarter last year. In addition, ATLAS ENERGY LP has also vastly surpassed the industry average cash flow growth rate of 17.57%.
- ATLAS ENERGY LP's earnings per share declined by 8.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ATLAS ENERGY LP reported poor results of -$1.48 versus -$1.02 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus -$1.48).
- The debt-to-equity ratio is very high at 8.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, ATLS has a quick ratio of 0.60, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ATLAS ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Atlas Energy Ratings Report.
- Our dividend calendar.