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: 7.30% Ensco (NYSE: ESV) shares currently have a dividend yield of 7.30%. 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 18.69. The average volume for Ensco has been 4,435,400 shares per day over the past 30 days. Ensco has a market cap of $9.7 billion and is part of the energy industry. Shares are down 30.2% 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 Ensco as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- ENSCO PLC has improved earnings per share by 16.3% 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, ENSCO PLC increased its bottom line by earning $6.04 versus $5.24 in the prior year. This year, the market expects an improvement in earnings ($6.12 versus $6.04).
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.8%. Since the same quarter one year prior, revenues slightly increased by 8.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that ESV's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.03 is high and demonstrates strong liquidity.
- Net operating cash flow has declined marginally to $601.90 million or 7.14% 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.
- 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, ENSCO PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Ensco Ratings Report.
- DCT's revenue growth has slightly outpaced the industry average of 13.7%. Since the same quarter one year prior, revenues rose by 16.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DCT INDUSTRIAL TRUST INC 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, DCT INDUSTRIAL TRUST INC continued to lose money by earning -$0.03 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$0.03).
- 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The gross profit margin for DCT INDUSTRIAL TRUST INC is rather low; currently it is at 21.41%. Regardless of DCT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DCT's net profit margin of 14.25% is significantly lower than the industry average.
- You can view the full DCT Industrial Ratings Report.
- RESI's very impressive revenue growth greatly exceeded the industry average of 13.7%. Since the same quarter one year prior, revenues leaped by 452.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ALTISOURCE RESIDENTIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 45.30% is the gross profit margin for ALTISOURCE RESIDENTIAL CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, RESI's net profit margin of 34.53% compares favorably to the industry average.
- RESI has underperformed the S&P 500 Index, declining 22.49% from its price level of one year ago. 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.
- You can view the full Altisource Residential Corporation Ratings Report.
- Our dividend calendar.