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." Washington REIT (NYSE: WRE) shares currently have a dividend yield of 4.40%. Washington Real Estate Investment Trust is an equity real estate investment trust (REIT). The company engages in the ownership, operation, and development of real properties. The firm invests in real estate markets of the greater Washington D.C. metro region. The average volume for Washington REIT has been 336,700 shares per day over the past 30 days. Washington REIT has a market cap of $1.8 billion and is part of the real estate industry. Shares are up 14.9% year-to-date as of the close of trading on Friday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreet Ratings rates Washington REIT as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 9.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- 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. 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.
- WASHINGTON REIT reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, WASHINGTON REIT reported lower earnings of $0.00 versus $0.12 in the prior year. This year, the market expects an increase in earnings to $1.65 from $0.00.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, WASHINGTON REIT's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for WASHINGTON REIT is rather low; currently it is at 21.78%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.49% significantly trails the industry average.
- You can view the full Washington REIT Ratings Report.
- The revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 36.7%. 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 MEMORIAL PRODUCTION PRTRS LP is currently very high, coming in at 72.57%. 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 -92.60% is in-line with the industry average.
- 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. 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 debt-to-equity ratio is very high at 3.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MEMORIAL PRODUCTION PRTRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Memorial Production Partners Ratings Report.
- The revenue growth came in higher than the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 9.1%. 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 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 7.0% when compared to the same quarter one year prior, going from $133.50 million to $142.83 million.
- The gross profit margin for ARES CAPITAL CORP is rather high; currently it is at 65.83%. Regardless of ARCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARCC's net profit margin of 63.50% significantly outperformed against the industry.
- ARES CAPITAL CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ARES CAPITAL CORP reported lower earnings of $1.81 versus $2.20 in the prior year. For the next year, the market is expecting a contraction of 19.1% in earnings ($1.47 versus $1.81).
- 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 Capital Markets industry and the overall market, ARES CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ares Capital Corporation Ratings Report.
- Our dividend calendar.