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." Parkway Properties Dividend Yield: 4.10% Parkway Properties (NYSE: PKY) shares currently have a dividend yield of 4.10%. Parkway Properties, Inc., a real estate investment trust (REIT), engages in the operation, acquisition, ownership, management, and leasing of office properties. It operates and invests principally in office properties in the southeastern and southwestern United States and Chicago. The average volume for Parkway Properties has been 483,600 shares per day over the past 30 days. Parkway Properties has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 3.8% 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 Parkway Properties as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- PKY's very impressive revenue growth greatly exceeded the industry average of 11.6%. Since the same quarter one year prior, revenues leaped by 51.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- Net operating cash flow has significantly decreased to $9.35 million or 58.36% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 29.2% when compared to the same quarter one year ago, falling from -$7.62 million to -$9.85 million.
- You can view the full Parkway Properties Ratings Report.
- UFS's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 5.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
- DOMTAR CORP 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, DOMTAR CORP reported lower earnings of $1.37 versus $2.38 in the prior year. This year, the market expects an improvement in earnings ($3.07 versus $1.37).
- Net operating cash flow has decreased to $104.00 million or 13.33% when compared to the same quarter last year. Despite a decrease in cash flow DOMTAR CORP is still fairing well by exceeding its industry average cash flow growth rate of -28.33%.
- In its most recent trading session, UFS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full Domtar Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 36.7%. 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 55.81% to $48.03 million when compared to the same quarter last year. In addition, MEMORIAL PRODUCTION PRTRS LP has also vastly surpassed the industry average cash flow growth rate of -5.24%.
- 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.
- The debt-to-equity ratio is very high at 3.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.44, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MEMORIAL PRODUCTION PRTRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Memorial Production Partners Ratings Report.
- Our dividend calendar.