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."Enerplus Dividend Yield: 10.30% Enerplus (NYSE: ERF) shares currently have a dividend yield of 10.30%. Enerplus Corporation, together with subsidiaries, is engaged in the exploration and development of crude oil and natural gas in the United States and Canada. The company has a P/E ratio of 11.75. The average volume for Enerplus has been 1,505,700 shares per day over the past 30 days. Enerplus has a market cap of $1.9 billion and is part of the energy industry. Shares are down 10.6% 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 Enerplus as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- ERF's very impressive revenue growth greatly exceeded the industry average of 6.5%. Since the same quarter one year prior, revenues leaped by 62.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.53, 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 0.43 is very weak and demonstrates a lack of ability to pay short-term obligations.
- ERF'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 52.76%, 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.
- Net operating cash flow has declined marginally to $199.05 million or 8.76% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ENERPLUS CORP has marginally lower results.
- You can view the full Enerplus Ratings Report.
- APO, with its very weak revenue results, has greatly underperformed against the industry average of 0.2%. Since the same quarter one year prior, revenues plummeted by 80.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Capital Markets industry and the overall market, APOLLO GLOBAL MANAGEMENT LLC's return on equity exceeds that of both the industry average and the S&P 500.
- APOLLO GLOBAL MANAGEMENT LLC 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APOLLO GLOBAL MANAGEMENT LLC increased its bottom line by earning $3.97 versus $1.95 in the prior year. For the next year, the market is expecting a contraction of 59.4% in earnings ($1.61 versus $3.97).
- 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 Capital Markets industry. The net income has significantly decreased by 98.8% when compared to the same quarter one year ago, falling from $192.52 million to $2.21 million.
- The gross profit margin for APOLLO GLOBAL MANAGEMENT LLC is currently lower than what is desirable, coming in at 28.17%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 0.99% significantly trails the industry average.
- You can view the full Apollo Global Management Ratings Report.
- EJ's revenue growth has slightly outpaced the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 11.8%. 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.
- EJ's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.90, which clearly demonstrates the ability to cover short-term cash needs.
- E-HOUSE CHINA HOLDINGS -ADR 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. 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, E-HOUSE CHINA HOLDINGS -ADR turned its bottom line around by earning $0.36 versus -$0.59 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus $0.36).
- 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 Real Estate Management & Development industry. The net income has significantly decreased by 73.5% when compared to the same quarter one year ago, falling from $19.23 million to $5.09 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.30%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 78.57% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, EJ is still more expensive than most of the other companies in its industry.
- You can view the full E-House China Holdings Ratings Report.
- Our dividend calendar.