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." Leju Holdings Dividend Yield: 8.50% Leju Holdings (NYSE: LEJU) shares currently have a dividend yield of 8.50%. Leju Holdings Limited, through its subsidiaries, provides online real estate services in the People's Republic of China. The company has a P/E ratio of 13.79. The average volume for Leju Holdings has been 463,300 shares per day over the past 30 days. Leju Holdings has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 20.7% year-to-date as of the close of trading on Wednesday. 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 Leju Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and weak operating cash flow. 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 Internet Software & Services industry. The net income has significantly decreased by 337.4% when compared to the same quarter one year ago, falling from $2.24 million to -$5.32 million.
- Net operating cash flow has significantly decreased to -$24.20 million or 461.19% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- LEJU HOLDINGS LTD -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 year, the market expects an improvement in earnings ($0.67 versus $0.50).
- The gross profit margin for LEJU HOLDINGS LTD -ADR is currently very high, coming in at 84.13%. Regardless of LEJU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LEJU's net profit margin of -5.68% significantly underperformed when compared to the industry average.
- The share price of LEJU HOLDINGS LTD -ADR has not done very well: it is down 6.67% 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.
- You can view the full Leju Holdings Ratings Report.