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: 5.10% Pan American Silver (NASDAQ: PAAS) shares currently have a dividend yield of 5.10%. 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 2,769,200 shares per day over the past 30 days. Pan American Silver has a market cap of $1.5 billion and is part of the metals & mining industry. Shares are up 11.6% year-to-date as of the close of trading on Friday. 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 deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- 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 Metals & Mining industry. The net income has significantly decreased by 243.1% when compared to the same quarter one year ago, falling from $14.15 million to -$20.25 million.
- 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 currently extremely low, coming in at 12.16%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -11.36% is significantly below that of the industry average.
- Net operating cash flow has declined marginally to $38.50 million or 5.46% when compared to the same quarter last year. Despite a decrease in cash flow PAN AMERICAN SILVER CORP is still fairing well by exceeding its industry average cash flow growth rate of -31.38%.
- The share price of PAN AMERICAN SILVER CORP has not done very well: it is down 15.26% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 Pan American Silver Ratings Report.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, INVESCO MORTGAGE CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $91.67 million or 24.76% 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.
- In its most recent trading session, IVR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- IVR, with its decline in revenue, underperformed when compared the industry average of 13.6%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- INVESCO MORTGAGE CAPITAL 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, INVESCO MORTGAGE CAPITAL INC reported lower earnings of $0.90 versus $2.89 in the prior year. This year, the market expects an improvement in earnings ($1.87 versus $0.90).
- You can view the full Invesco Mortgage Capital Ratings Report.
- PGH'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 53.17%, 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. 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.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, PENGROWTH ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- PENGROWTH ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PENGROWTH ENERGY CORP swung to a loss, reporting -$0.61 versus $0.04 in the prior year.
- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.34 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for PENGROWTH ENERGY CORP is currently very high, coming in at 72.54%. It has increased significantly from the same period last year. Along with this, the net profit margin of 13.16% is above that of the industry average.
- You can view the full Pengrowth Energy Ratings Report.
- Our dividend calendar.