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."LinnCo (NASDAQ: LNCO) shares currently have a dividend yield of 10.00%. LinnCo, LLC, through its limited liability company interests in Linn Energy, LLC, focuses on the acquisition and development of oil and natural gas properties in the United States. The company was founded in 2012 and is headquartered in Houston, Texas. The average volume for LinnCo has been 1,222,100 shares per day over the past 30 days. LinnCo has a market cap of $3.7 billion and is part of the energy industry. Shares are down 4.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates LinnCo as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and deteriorating net income. Highlights from the ratings report include:
- LNCO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 18.09, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 269.64% to $93.23 million when compared to the same quarter last year. In addition, LINNCO LLC has also vastly surpassed the industry average cash flow growth rate of 18.80%.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, LNCO has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from -$18.22 million to -$19.48 million.
- You can view the full LinnCo Ratings Report.
- 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 241.7% when compared to the same quarter one year prior, rising from -$3.64 million to $5.15 million.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, CHAMBERS STREET PROPERTIES underperformed against that of the industry average and is significantly less than that of the S&P 500.
- CSG, with its decline in revenue, underperformed when compared the industry average of 10.5%. Since the same quarter one year prior, revenues slightly dropped by 2.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, CSG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- CHAMBERS STREET PROPERTIES has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. For the next year, the market is expecting a contraction of 75.0% in earnings ($0.08 versus $0.30).
- You can view the full Chambers Street Properties Ratings Report.
- RPAI's revenue growth has slightly outpaced the industry average of 10.2%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the 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 88.1% when compared to the same quarter one year prior, rising from $15.97 million to $30.04 million.
- 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, RETAIL PPTYS OF AMERICA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RETAIL PPTYS OF AMERICA INC is currently lower than what is desirable, coming in at 25.35%. Regardless of RPAI'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 20.59% trails the industry average.
- You can view the full Retail Properties of America Ratings Report.
- Our dividend calendar.