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." Harsco Dividend Yield: 4.10% Harsco (NYSE: HSC) shares currently have a dividend yield of 4.10%. Harsco Corporation provides industrial services and engineered products worldwide. The company operates in three segments: Harsco Metals and Minerals, Harsco Rail, and Harsco Industrial. The average volume for Harsco has been 523,900 shares per day over the past 30 days. Harsco has a market cap of $1.6 billion and is part of the metals & mining industry. Shares are down 26.9% year-to-date as of the close of trading on Tuesday. 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 Harsco as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- HARSCO CORP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HARSCO CORP continued to lose money by earning -$2.81 versus -$3.15 in the prior year. This year, the market expects an improvement in earnings ($0.79 versus -$2.81).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 110.1% when compared to the same quarter one year prior, rising from -$233.66 million to $23.64 million.
- The revenue fell significantly faster than the industry average of 2.5%. Since the same quarter one year prior, revenues fell by 28.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for HARSCO CORP is currently lower than what is desirable, coming in at 30.09%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.49% trails that of the industry average.
- Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, HSC maintains a poor quick ratio of 0.79, which illustrates the inability to avoid short-term cash problems.
- You can view the full Harsco Ratings Report.
- The revenue growth came in higher than the industry average of 0.5%. Since the same quarter one year prior, revenues rose by 24.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has improved to $40.18 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
- Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, PATTERN ENERGY GROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The debt-to-equity ratio is very high at 2.06 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, PEGI has managed to keep a strong quick ratio of 2.11, which demonstrates the ability to cover short-term cash needs.
- 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 823.7% when compared to the same quarter one year ago, falling from $1.00 million to -$7.21 million.
- You can view the full Pattern Energy Group Inc Class A Ratings Report.
- HTA's revenue growth has slightly outpaced the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 15.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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, HEALTHCARE TRUST OF AMERICA underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for HEALTHCARE TRUST OF AMERICA is rather low; currently it is at 23.52%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 16.78% trails that of the industry average.
- You can view the full Healthcare Trust of America Ratings Report.
- Our dividend calendar.