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."Baytex Energy Dividend Yield: 5.80% Baytex Energy (NYSE: BTE) shares currently have a dividend yield of 5.80%. Baytex Energy Corp., an oil and gas company, engages in the acquisition, development, exploitation, and production of oil and natural gas in the Western Canadian Sedimentary Basin and the United States. The company offers heavy oil, light oil, condensate, and natural gas liquids. The average volume for Baytex Energy has been 1,030,200 shares per day over the past 30 days. Baytex Energy has a market cap of $2.8 billion and is part of the energy industry. Shares are up 3.1% year-to-date as of the close of trading on Thursday. 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 Baytex Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- BAYTEX ENERGY 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. During the past fiscal year, BAYTEX ENERGY CORP swung to a loss, reporting -$0.65 versus $1.32 in the prior year.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 467.7% when compared to the same quarter one year ago, falling from $47.84 million to -$175.92 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 59.36%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 373.68% compared to the year-earlier 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.
- Despite the weak revenue results, BTE has significantly outperformed against the industry average of 38.3%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Baytex Energy Ratings Report.
- BNS has underperformed the S&P 500 Index, declining 11.68% from its price level of one year ago. 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.
- BANK OF NOVA SCOTIA's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, BANK OF NOVA SCOTIA increased its bottom line by earning $5.66 versus $1.29 in the prior year.
- The gross profit margin for BANK OF NOVA SCOTIA is currently very high, coming in at 72.49%. Regardless of BNS'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 21.67% trails the industry average.
- 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 Commercial Banks industry average. The net income increased by 1.5% when compared to the same quarter one year prior, going from $1,655.00 million to $1,679.00 million.
- Net operating cash flow has significantly increased by 286.39% to $5,850.00 million when compared to the same quarter last year. In addition, BANK OF NOVA SCOTIA has also vastly surpassed the industry average cash flow growth rate of -30.59%.
- You can view the full Bank of Nova Scotia Ratings Report.
- VALE'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 49.65%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, VALE is still more expensive than most of the other companies in its industry.
- 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 Metals & Mining industry and the overall market on the basis of return on equity, VALE SA underperformed against that of the industry average and is significantly less than that of the S&P 500.
- VALE SA reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, VALE SA increased its bottom line by earning $0.13 versus $0.01 in the prior year. For the next year, the market is expecting a contraction of 107.7% in earnings (-$0.01 versus $0.13).
- VALE's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.85 is weak.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 17.6%. Since the same quarter one year prior, revenues fell by 15.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Vale Ratings Report.
- Our dividend calendar.