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." Knightsbridge Tankers Dividend Yield: 7.50% Knightsbridge Tankers (NASDAQ: VLCCF) shares currently have a dividend yield of 7.50%. Knightsbridge Tankers Limited, a shipping company, is engaged in the seaborne transportation of dry bulk cargoes worldwide. As of May 09, 2014, it owned and operated a fleet of five Capesize dry bulk carriers. The company was founded in 1996 and is based in Hamilton, Bermuda. The company has a P/E ratio of 76.36. The average volume for Knightsbridge Tankers has been 591,800 shares per day over the past 30 days. Knightsbridge Tankers has a market cap of $525.1 million and is part of the transportation industry. Shares are up 8.8% 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 Knightsbridge Tankers as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- VLCCF's very impressive revenue growth greatly exceeded the industry average of 10.2%. Since the same quarter one year prior, revenues leaped by 168.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- VLCCF's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- KNIGHTSBRIDGE TANKERS LTD 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, KNIGHTSBRIDGE TANKERS LTD reported lower earnings of $0.11 versus $0.25 in the prior year. This year, the market expects an improvement in earnings ($0.25 versus $0.11).
- 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 Marine industry and the overall market on the basis of return on equity, KNIGHTSBRIDGE TANKERS LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Knightsbridge Tankers Ratings Report.