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."Home Properties (NYSE: HME) shares currently have a dividend yield of 4.50%. Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 38.96. The average volume for Home Properties has been 252,700 shares per day over the past 30 days. Home Properties has a market cap of $3.7 billion and is part of the real estate industry. Shares are up 21.6% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Home Properties as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 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 3.9%. 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 slightly increased to $78.48 million or 3.73% when compared to the same quarter last year. Despite an increase in cash flow, HOME PROPERTIES INC's cash flow growth rate is still lower than the industry average growth rate of 29.86%.
- The gross profit margin for HOME PROPERTIES INC is currently lower than what is desirable, coming in at 28.53%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 27.24% is above that of the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 11.7% when compared to the same quarter one year ago, dropping from $51.88 million to $45.79 million.
- You can view the full Home Properties Ratings Report.
- CQP's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 1.7%. 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 CHENIERE ENERGY PARTNERS LP is currently very high, coming in at 79.69%. 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 -103.73% is in-line with the industry average.
- 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 against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 34.8% when compared to the same quarter one year ago, falling from -$51.73 million to -$69.73 million.
- Net operating cash flow has significantly decreased to -$0.46 million or 105.90% 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 Cheniere Energy Partners Ratings Report.
- CMLP's very impressive revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues leaped by 641.5%. 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 70.71% to $58.10 million when compared to the same quarter last year. In addition, CRESTWOOD MIDSTREAM PTNRS LP has also vastly surpassed the industry average cash flow growth rate of 17.51%.
- The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that CMLP's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CRESTWOOD MIDSTREAM PTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CRESTWOOD MIDSTREAM PTNRS LP is rather low; currently it is at 16.16%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 0.44% trails that of the industry average.
- You can view the full Crestwood Midstream Partners Ratings Report.
- Our dividend calendar.