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."Piedmont Office Realty (NYSE: PDM) shares currently have a dividend yield of 4.10%. Piedmont Office Realty Trust, Inc. engages in the acquisition and ownership of commercial real estate properties in the United States. Its property portfolio primarily consists of office and industrial buildings, warehouses, and manufacturing facilities. The company has a P/E ratio of 50.74. The average volume for Piedmont Office Realty has been 799,100 shares per day over the past 30 days. Piedmont Office Realty has a market cap of $3.0 billion and is part of the real estate industry. Shares are up 16% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Piedmont Office Realty 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 unimpressive growth in net income, poor profit margins and feeble growth in the company's earnings per share. 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 3.6%. 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 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 35.9% when compared to the same quarter one year ago, falling from $14.65 million to $9.39 million.
- The gross profit margin for PIEDMONT OFFICE REALTY TRUST is rather low; currently it is at 18.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.90% significantly trails the industry average.
- You can view the full Piedmont Office Realty Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 14.4% when compared to the same quarter one year prior, going from $7.00 million to $8.01 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, BGC PARTNERS INC's return on equity exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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 BGC PARTNERS INC is currently extremely low, coming in at 7.13%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.81% significantly trails the industry average.
- Net operating cash flow has significantly decreased to $0.06 million or 99.14% 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 BGC Partners Ratings Report.
- HTA's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HEALTHCARE TRUST OF AMERICA 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, HEALTHCARE TRUST OF AMERICA turned its bottom line around by earning $0.11 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus $0.11).
- 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 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 on the basis of return on equity, HEALTHCARE TRUST OF AMERICA underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for HEALTHCARE TRUST OF AMERICA is rather low; currently it is at 21.38%. Regardless of HTA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HTA's net profit margin of 5.79% is significantly lower than the industry average.
- You can view the full Healthcare Trust of America Ratings Report.
- Our dividend calendar.