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."Ensco Dividend Yield: 6.90% Ensco (NYSE: ESV) shares currently have a dividend yield of 6.90%. Ensco plc provides offshore contract drilling services to the oil and gas industry worldwide. The company operates through three segments: Floaters, Jackups, and Other. The company has a P/E ratio of 22.67. The average volume for Ensco has been 3,093,200 shares per day over the past 30 days. Ensco has a market cap of $10.3 billion and is part of the energy industry. Shares are down 24% year-to-date as of the close of trading on Tuesday. 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 Ensco as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- ESV's revenue growth trails the industry average of 19.1%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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 increased to $504.80 million or 14.18% when compared to the same quarter last year. Despite an increase in cash flow, ENSCO PLC's cash flow growth rate is still lower than the industry average growth rate of 24.84%.
- The gross profit margin for ENSCO PLC is rather high; currently it is at 52.12%. Regardless of ESV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ESV's net profit margin of -97.48% significantly underperformed when compared to the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, ENSCO PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of ENSCO PLC has not done very well: it is down 20.49% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Ensco Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.6%. 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.
- 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 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.
- Net operating cash flow has decreased to $16.64 million or 36.22% 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 Washington REIT Ratings Report.
- RPT's revenue growth has slightly outpaced the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 18.1%. 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 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.
- RAMCO-GERSHENSON PROPERTIES has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, RAMCO-GERSHENSON PROPERTIES's EPS of $0.01 remained unchanged from the prior years' EPS of $0.01. For the next year, the market is expecting a contraction of 1200.0% in earnings (-$0.11 versus $0.01).
- The gross profit margin for RAMCO-GERSHENSON PROPERTIES is currently extremely low, coming in at 14.47%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 2.15% significantly trails the industry average.
- Net operating cash flow has declined marginally to $27.55 million or 3.73% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Ramco-Gershenson Properties Ratings Report.
- Our dividend calendar.