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." Consolidated Communications Dividend Yield: 7.70% Consolidated Communications (NASDAQ: CNSL) shares currently have a dividend yield of 7.70%. Consolidated Communications Holdings, Inc., through its subsidiaries, provides various integrated communications services to residential and business clients. The company has a P/E ratio of 67.20. The average volume for Consolidated Communications has been 311,100 shares per day over the past 30 days. Consolidated Communications has a market cap of $1.0 billion and is part of the telecommunications industry. Shares are down 26.8% 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 Consolidated Communications as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 28.7%. 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.
- Net operating cash flow has slightly increased to $52.40 million or 8.28% when compared to the same quarter last year. Despite an increase in cash flow, CONSOLIDATED COMM HLDGS INC's average is still marginally south of the industry average growth rate of 8.75%.
- The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 58.51%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.05% trails the industry average.
- Although CNSL's debt-to-equity ratio of 4.34 is very high, it is currently less than that of the industry average. To add to this, CNSL has a quick ratio of 0.64, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Consolidated Communications Ratings Report.
- The revenue growth greatly exceeded the industry average of 38.3%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.51, which clearly demonstrates the ability to cover short-term cash needs.
- In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, QEP MIDSTREAM PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- QEPM'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 25.57%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full QEP Midstream Partners Ratings Report.
- 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, NEW YORK MORTGAGE TRUST INC's return on equity exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 3.7% when compared to the same quarter one year prior, going from $22.71 million to $23.54 million.
- NEW YORK MORTGAGE TRUST INC's earnings per share declined by 27.6% in the most recent quarter compared to 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, NEW YORK MORTGAGE TRUST INC increased its bottom line by earning $1.47 versus $1.11 in the prior year. For the next year, the market is expecting a contraction of 34.7% in earnings ($0.96 versus $1.47).
- The gross profit margin for NEW YORK MORTGAGE TRUST INC is currently lower than what is desirable, coming in at 26.18%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 23.41% trails that of the industry average.
- You can view the full New York Mortgage Ratings Report.
- Our dividend calendar.