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."Ship Finance International Dividend Yield: 11.50% Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 11.50%. Ship Finance International Limited owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. It is also involved in the charter, purchase, and sale of assets. The company has a P/E ratio of 14.74. The average volume for Ship Finance International has been 611,600 shares per day over the past 30 days. Ship Finance International has a market cap of $1.4 billion and is part of the transportation industry. Shares are up 3.6% year-to-date as of the close of trading on Monday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Ship Finance International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 19.6%. Since the same quarter one year prior, revenues rose by 23.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SHIP FINANCE INTL LTD has improved earnings per share by 35.0% 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, SHIP FINANCE INTL LTD increased its bottom line by earning $1.25 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $1.25).
- SFL has underperformed the S&P 500 Index, declining 18.76% 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.
- Currently the debt-to-equity ratio of 1.50 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated.
- You can view the full Ship Finance International Ratings Report.
- WSR's revenue growth has slightly outpaced the industry average of 10.0%. Since the same quarter one year prior, revenues rose by 11.7%. 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 126.6% when compared to the same quarter one year prior, rising from $1.26 million to $2.86 million.
- WHITESTONE REIT's earnings per share declined by 50.0% 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, WHITESTONE REIT increased its bottom line by earning $0.24 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($0.26 versus $0.24).
- The gross profit margin for WHITESTONE REIT is rather low; currently it is at 20.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 14.86% significantly trails the industry average.
- Net operating cash flow has decreased to $5.77 million or 36.95% 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.
- You can view the full Whitestone REIT Ratings Report.
- The revenue growth came in higher than the industry average of 13.0%. Since the same quarter one year prior, revenues rose by 13.8%. 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.
- Net operating cash flow has increased to -$61.84 million or 40.57% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.62%.
- The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 66.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -61.07% is in-line with the industry average.
- 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 160.7% when compared to the same quarter one year ago, falling from $39.46 million to -$23.95 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. When compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Pennant Park Investment Corporation Ratings Report.
- Our dividend calendar.