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." Darden Restaurants Dividend Yield: 4.60% Darden Restaurants (NYSE: DRI) shares currently have a dividend yield of 4.60%. Darden Restaurants, Inc. owns and operates full service restaurants in the United States and Canada. It operates restaurants under the Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's, and Yard House brand names. The company has a P/E ratio of 34.60. The average volume for Darden Restaurants has been 1,672,100 shares per day over the past 30 days. Darden Restaurants has a market cap of $6.3 billion and is part of the leisure industry. Shares are down 12.4% year-to-date as of the close of trading on Wednesday. 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 Darden Restaurants as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- DRI's revenue growth has slightly outpaced the industry average of 5.5%. 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 gross profit margin for DARDEN RESTAURANTS INC is rather low; currently it is at 20.24%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.24% trails that of the industry average.
- Net operating cash flow has significantly decreased to $103.40 million or 60.16% 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 Darden Restaurants Ratings Report.