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." Guess Dividend Yield: 4.90% Guess (NYSE: GES) shares currently have a dividend yield of 4.90%. Guess , Inc. designs, markets, distributes, and licenses lifestyle collections of contemporary apparel and accessories for men, women, and children that reflect the American lifestyle and European fashion sensibilities. The company has a P/E ratio of 16.44. The average volume for Guess has been 1,774,800 shares per day over the past 30 days. Guess has a market cap of $1.6 billion and is part of the retail industry. Shares are down 15.4% year-to-date as of the close of trading on Tuesday. 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 Guess as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- GES's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GES has a quick ratio of 2.32, which demonstrates the ability of the company to cover short-term liquidity needs.
- 38.06% is the gross profit margin for GUESS INC which we consider to be strong. Regardless of GES's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GES's net profit margin of 8.04% compares favorably to the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Specialty Retail industry and the overall market, GUESS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has decreased to $158.71 million or 16.75% 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 Guess Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 67.3% when compared to the same quarter one year prior, rising from $38.25 million to $63.97 million.
- The gross profit margin for TEEKAY LNG PARTNERS LP is currently very high, coming in at 77.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.72% significantly outperformed against the industry average.
- 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 on the basis of return on equity, TEEKAY LNG PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- TGP has underperformed the S&P 500 Index, declining 16.65% 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.
- The debt-to-equity ratio of 1.24 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.45, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Teekay LNG Partners Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 15.5% when compared to the same quarter one year prior, going from -$58.00 million to -$49.00 million.
- TRONOX LTD has improved earnings per share by 17.6% 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, TRONOX LTD reported poor results of -$3.73 versus -$1.10 in the prior year. This year, the market expects an improvement in earnings (-$0.50 versus -$3.73).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 14.2%. Since the same quarter one year prior, revenues slightly dropped by 7.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for TRONOX LTD is currently extremely low, coming in at 9.09%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -12.72% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$65.00 million or 441.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Tronox Ratings Report.
- Our dividend calendar.