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 4.30%. 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 100.36. The average volume for Education Realty has been 1,523,100 shares per day over the past 30 days. Education Realty has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 25.7% year-to-date as of the close of trading on Thursday. 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 ($0.17 versus $0.05).
- 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.
- The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 32.5%. 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.
- 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 351.6% when compared to the same quarter one year prior, rising from -$0.15 million to $0.39 million.
- Net operating cash flow has increased to $14.53 million or 15.49% when compared to the same quarter last year. Despite an increase in cash flow, STAG INDUSTRIAL INC's cash flow growth rate is still lower than the industry average growth rate of 29.86%.
- 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, STAG INDUSTRIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for STAG INDUSTRIAL INC is currently extremely low, coming in at 14.18%. Regardless of STAG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, STAG's net profit margin of 0.96% is significantly lower than the industry average.
- You can view the full Stag Industrial Ratings Report.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 579.0% when compared to the same quarter one year prior, rising from $11.41 million to $77.44 million.
- The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for PBF ENERGY INC is currently extremely low, coming in at 6.95%. Regardless of PBF's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.63% trails the industry average.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, PBF ENERGY INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full PBF Energy Ratings Report.
- Our dividend calendar.