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."Valley National Bancorp (NYSE: VLY) shares currently have a dividend yield of 4.60%. Valley National Bancorp operates as the bank holding company for the Valley National Bank that provides commercial, retail, and trust and investment services. The company has a P/E ratio of 18.88. The average volume for Valley National Bancorp has been 1,988,300 shares per day over the past 30 days. Valley National Bancorp has a market cap of $1.9 billion and is part of the banking industry. Shares are down 3.2% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Valley National Bancorp as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 79.91%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VLY's net profit margin of 17.40% significantly trails the industry average.
- VLY, with its decline in revenue, slightly underperformed the industry average of 8.2%. Since the same quarter one year prior, revenues slightly dropped by 8.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The change in net income from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income has decreased by 13.0% when compared to the same quarter one year ago, dropping from $33.92 million to $29.52 million.
- VALLEY NATIONAL BANCORP's earnings per share declined by 11.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, VALLEY NATIONAL BANCORP reported lower earnings of $0.67 versus $0.74 in the prior year. For the next year, the market is expecting a contraction of 14.9% in earnings ($0.57 versus $0.67).
- You can view the full Valley National Bancorp Ratings Report.
- DRI's revenue growth has slightly outpaced the industry average of 5.9%. 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.
- DARDEN RESTAURANTS INC's earnings per share declined by 39.0% 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DARDEN RESTAURANTS INC reported lower earnings of $1.38 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $1.38).
- The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.11, which clearly demonstrates the inability to cover short-term cash needs.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, DARDEN RESTAURANTS INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Darden Restaurants Ratings Report.
- LINE's very impressive revenue growth greatly exceeded the industry average of 1.5%. Since the same quarter one year prior, revenues leaped by 98.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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.
- LINN ENERGY LLC reported significant earnings per share improvement in the most recent quarter compared to 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, LINN ENERGY LLC reported poor results of -$2.78 versus -$1.86 in the prior year. This year, the market expects an improvement in earnings ($1.51 versus -$2.78).
- 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 Oil, Gas & Consumable Fuels industry and the overall market, LINN ENERGY LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- Currently the debt-to-equity ratio of 1.69 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.48, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Linn Energy Ratings Report.
- Our dividend calendar.