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 "Sell." Gladstone Commercial Dividend Yield: 8.30% Gladstone Commercial (NASDAQ: GOOD) shares currently have a dividend yield of 8.30%. Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans. The average volume for Gladstone Commercial has been 109,600 shares per day over the past 30 days. Gladstone Commercial has a market cap of $343.4 million and is part of the real estate industry. Shares are up 0.9% year-to-date as of the close of trading on Thursday. 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 Gladstone Commercial as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 25.7% when compared to the same quarter one year ago, falling from $0.31 million to $0.23 million.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $7.64 million or 4.95% when compared to the same quarter last year. Despite a decrease in cash flow of 4.95%, GLADSTONE COMMERCIAL CORP is still significantly exceeding the industry average of -61.55%.
- In its most recent trading session, GOOD 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- GLADSTONE COMMERCIAL CORP has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. 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, GLADSTONE COMMERCIAL CORP reported poor results of -$0.22 versus -$0.05 in the prior year. For the next year, the market is expecting a contraction of 311.4% in earnings (-$0.91 versus -$0.22).
- You can view the full Gladstone Commercial Ratings Report.