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 4.50%. 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 1062.00. The average volume for Education Realty has been 2,294,400 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 19.1% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Education Realty as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and notable return on equity. However, as a counter to these strengths, we find that net income has been generally deteriorating over time. Highlights from the ratings report include:
- EDR's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 18.7%. 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.
- This stock has managed to rise its share value by 11.98% over the past twelve months. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- EDUCATION REALTY TRUST INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. 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, 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).
- 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, EDUCATION REALTY TRUST INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 329.9% when compared to the same quarter one year ago, falling from $3.83 million to -$8.81 million.
- You can view the full Education Realty Ratings Report.
- The gross profit margin for CANADIAN IMPERIAL BANK is currently very high, coming in at 72.28%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CM's net profit margin of 7.76% significantly trails the industry average.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.2%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing 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 Commercial Banks industry. The net income has significantly decreased by 63.1% when compared to the same quarter one year ago, falling from $860.00 million to $317.00 million.
- Net operating cash flow has significantly decreased to -$2,201.00 million or 1036.59% 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 Canadian Imperial Bank of Commerce Ratings Report.
- The gross profit margin for PHILIP MORRIS INTERNATIONAL is rather high; currently it is at 67.91%. Regardless of PM'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 23.73% trails the industry average.
- PM, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- PHILIP MORRIS INTERNATIONAL's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PHILIP MORRIS INTERNATIONAL increased its bottom line by earning $5.26 versus $5.18 in the prior year. For the next year, the market is expecting a contraction of 1.5% in earnings ($5.18 versus $5.26).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PM has underperformed the S&P 500 Index, declining 8.04% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 Tobacco industry average. The net income has decreased by 12.9% when compared to the same quarter one year ago, dropping from $2,124.00 million to $1,851.00 million.
- You can view the full Philip Morris International Ratings Report.
- Our dividend calendar.