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." Pan American Silver Dividend Yield: 5.30% Pan American Silver (NASDAQ: PAAS) shares currently have a dividend yield of 5.30%. Pan American Silver Corp., together with its subsidiaries, operates and develops, and explores for silver producing properties and assets in Mexico, Peru, Argentina, and Bolivia. The company also produces and sells gold, zinc, lead, and copper. The average volume for Pan American Silver has been 1,718,800 shares per day over the past 30 days. Pan American Silver has a market cap of $1.4 billion and is part of the metals & mining industry. Shares are down 19.1% 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 Pan American Silver as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- 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 Metals & Mining industry and the overall market on the basis of return on equity, PAN AMERICAN SILVER CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for PAN AMERICAN SILVER CORP is rather low; currently it is at 24.17%. Regardless of PAAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PAAS's net profit margin of -2.72% significantly underperformed when compared to the industry average.
- PAAS has underperformed the S&P 500 Index, declining 12.36% 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.
- PAN AMERICAN SILVER 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, PAN AMERICAN SILVER CORP swung to a loss, reporting -$2.98 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$2.98).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 97.1% when compared to the same quarter one year prior, rising from -$186.54 million to -$5.47 million.
- You can view the full Pan American Silver Ratings Report.