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.