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."SeaWorld Entertainment Dividend Yield: 4.60% SeaWorld Entertainment (NYSE: SEAS) shares currently have a dividend yield of 4.60%. SeaWorld Entertainment, Inc. operates as a theme park and entertainment company in the United States. The company has a P/E ratio of 16.87. The average volume for SeaWorld Entertainment has been 2,763,200 shares per day over the past 30 days. SeaWorld Entertainment has a market cap of $1.7 billion and is part of the leisure industry. Shares are down 35.9% 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 SeaWorld Entertainment as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 2.95 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 0.34, which clearly demonstrates the inability to cover short-term cash needs.
- SEAS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.19%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- SEAWORLD ENTERTAINMENT INC 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, SEAWORLD ENTERTAINMENT INC reported lower earnings of $0.57 versus $0.83 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus $0.57).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, SEAWORLD ENTERTAINMENT INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full SeaWorld Entertainment Ratings Report.
- 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 Chemicals industry. The net income has significantly decreased by 89.8% when compared to the same quarter one year ago, falling from -$49.00 million to -$93.00 million.
- The gross profit margin for TRONOX LTD is rather low; currently it is at 15.85%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -21.67% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $54.00 million or 58.77% 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 debt-to-equity ratio of 1.21 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 5.00, which shows the ability to cover short-term cash needs.
- TRONOX LTD 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TRONOX LTD swung to a loss, reporting -$1.10 versus $13.25 in the prior year. This year, the market expects an improvement in earnings (-$0.81 versus -$1.10).
- You can view the full Tronox Ratings Report.
- 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 Electrical Equipment industry. The net income has significantly decreased by 2241.4% when compared to the same quarter one year ago, falling from $5.80 million to -$124.20 million.
- The debt-to-equity ratio is very high at 2.12 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, BGC maintains a poor quick ratio of 0.88, which illustrates the inability to avoid short-term cash problems.
- 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 Electrical Equipment industry and the overall market, GENERAL CABLE CORP/DE's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for GENERAL CABLE CORP/DE is currently extremely low, coming in at 1.81%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -8.43% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 51.35%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 2418.18% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full General Cable Ratings Report.
- Our dividend calendar.