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.
- TGP's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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 TEEKAY LNG PARTNERS LP is currently very high, coming in at 74.85%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.07% significantly outperformed against the industry average.
- Currently the debt-to-equity ratio of 1.75 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 0.37, 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TEEKAY LNG PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Teekay LNG Partners Ratings Report.
- VGR's very impressive revenue growth greatly exceeded the industry average of 0.5%. Since the same quarter one year prior, revenues leaped by 106.7%. 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.
- Net operating cash flow has significantly increased by 516.13% to $93.08 million when compared to the same quarter last year. In addition, VECTOR GROUP LTD has also vastly surpassed the industry average cash flow growth rate of -30.66%.
- Compared to its closing price of one year ago, VGR's share price has jumped by 52.97%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- 44.72% is the gross profit margin for VECTOR GROUP LTD which we consider to be strong. Regardless of VGR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VGR's net profit margin of 2.66% is significantly lower than the industry average.
- 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 Tobacco industry. The net income has significantly decreased by 41.3% when compared to the same quarter one year ago, falling from $13.51 million to $7.93 million.
- You can view the full Vector Group Ratings Report.
- Our dividend calendar.