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."PennyMac Mortgage Investment Dividend Yield: 11.50% PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 11.50%. PennyMac Mortgage Investment Trust, a specialty finance company, through its subsidiaries, invests primarily in residential mortgage loans and mortgage-related assets. The company operates through two segments, Correspondent Lending and Investment Activities. The company has a P/E ratio of 8.22. The average volume for PennyMac Mortgage Investment has been 560,300 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 7.1% 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 PennyMac Mortgage Investment as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, disappointing return on equity and a generally disappointing performance in the stock itself. 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 38.0% when compared to the same quarter one year prior, rising from $54.50 million to $75.21 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.5%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, PENNYMAC MORTGAGE INVEST TR has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has significantly decreased to -$683.80 million or 217.40% 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 PennyMac Mortgage Investment Ratings Report.
- REGAL ENTERTAINMENT GROUP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, REGAL ENTERTAINMENT GROUP increased its bottom line by earning $1.00 versus $0.93 in the prior year. For the next year, the market is expecting a contraction of 3.5% in earnings ($0.97 versus $1.00).
- RGC, with its decline in revenue, underperformed when compared the industry average of 9.1%. Since the same quarter one year prior, revenues slightly dropped by 8.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- In its most recent trading session, RGC 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- Net operating cash flow has decreased to $84.90 million or 41.72% 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.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Media industry average. The net income has decreased by 6.4% when compared to the same quarter one year ago, dropping from $36.10 million to $33.80 million.
- You can view the full Regal Entertainment Group Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.5%. 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.
- Our dividend calendar.