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." CYS Investments Dividend Yield: 13.30% CYS Investments (NYSE: CYS) shares currently have a dividend yield of 13.30%. CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The company has a P/E ratio of 7.26. The average volume for CYS Investments has been 1,988,600 shares per day over the past 30 days. CYS Investments has a market cap of $1.5 billion and is part of the real estate industry. Shares are up 15.2% year-to-date as of the close of trading on Monday. 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 CYS Investments as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we find that the company's revenue growth has not been good. Highlights from the ratings report include:
- 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 139.8% when compared to the same quarter one year prior, rising from -$398.29 million to $158.38 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.
- CYS, with its decline in revenue, underperformed when compared the industry average of 11.6%. Since the same quarter one year prior, revenues fell by 11.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full CYS Investments Ratings Report.
- TRANSOCEAN LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TRANSOCEAN LTD increased its bottom line by earning $3.88 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($4.57 versus $3.88).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 91.2% when compared to the same quarter one year prior, rising from $307.00 million to $587.00 million.
- RIG, with its decline in revenue, underperformed when compared the industry average of 19.1%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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. When compared to other companies in the Energy Equipment & Services industry and the overall market, TRANSOCEAN LTD's return on equity is below that of both the industry average and the S&P 500.
- RIG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.60%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full Transocean Ratings Report.
- ENLK's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 57.1%. 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.
- Compared to its closing price of one year ago, ENLK's share price has jumped by 61.09%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- ENLINK MIDSTREAM PARTNERS LP's earnings per share declined by 50.0% 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, ENLINK MIDSTREAM PARTNERS LP continued to lose money by earning -$0.97 versus -$1.01 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus -$0.97).
- The gross profit margin for ENLINK MIDSTREAM PARTNERS LP is rather low; currently it is at 20.62%. Regardless of ENLK'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 4.48% trails the industry average.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, ENLINK MIDSTREAM PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full EnLink Midstream Partners Ratings Report.
- Our dividend calendar.