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." Philip Morris International Dividend Yield: 4.70% Philip Morris International (NYSE: PM) shares currently have a dividend yield of 4.70%. Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes, other tobacco products, and other nicotine-containing products. The company has a P/E ratio of 18.07. The average volume for Philip Morris International has been 5,379,600 shares per day over the past 30 days. Philip Morris International has a market cap of $132.7 billion and is part of the tobacco industry. Shares are up 4.9% 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 Philip Morris International as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The gross profit margin for PHILIP MORRIS INTERNATIONAL is rather high; currently it is at 68.88%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.13% is above that of the industry average.
- Despite the weak revenue results, PM has outperformed against the industry average of 23.1%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- PHILIP MORRIS INTERNATIONAL' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, PHILIP MORRIS INTERNATIONAL reported lower earnings of $4.76 versus $5.26 in the prior year. For the next year, the market is expecting a contraction of 7.1% in earnings ($4.42 versus $4.76).
- Net operating cash flow has significantly decreased to -$375.00 million or 152.44% 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 Philip Morris International Ratings Report.
- TS's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, TS has a quick ratio of 1.84, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $877.89 million or 43.48% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.17%.
- 36.07% is the gross profit margin for TENARIS SA which we consider to be strong. Regardless of TS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TS's net profit margin of 9.86% compares favorably to the industry average.
- TENARIS SA's earnings per share declined by 47.2% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, TENARIS SA reported lower earnings of $2.28 versus $2.63 in the prior year. For the next year, the market is expecting a contraction of 41.9% in earnings ($1.33 versus $2.28).
- 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 Energy Equipment & Services industry and the overall market, TENARIS SA'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 Tenaris Ratings Report.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- CVA, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- COVANTA HOLDING CORP 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, COVANTA HOLDING CORP swung to a loss, reporting -$0.02 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($0.36 versus -$0.02).
- Net operating cash flow has significantly decreased to $42.00 million or 59.22% 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.
- 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 Commercial Services & Supplies industry. The net income has significantly decreased by 311.1% when compared to the same quarter one year ago, falling from -$9.00 million to -$37.00 million.
- You can view the full Covanta Ratings Report.
- Our dividend calendar.