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." Greenhill Dividend Yield: 4.50% Greenhill (NYSE: GHL) shares currently have a dividend yield of 4.50%. Greenhill & Co., Inc., together with its subsidiaries, operates as an independent investment bank for corporations, partnerships, institutions, and governments worldwide. The company has a P/E ratio of 24.00. The average volume for Greenhill has been 293,500 shares per day over the past 30 days. Greenhill has a market cap of $1.2 billion and is part of the financial services industry. Shares are down 9.5% 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 Greenhill as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, premium valuation and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 42.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, GREENHILL & CO INC's return on equity exceeds that of both the industry average and the S&P 500.
- GREENHILL & CO INC reported significant earnings per share improvement 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, GREENHILL & CO INC reported lower earnings of $1.45 versus $1.56 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.45).
- GHL has underperformed the S&P 500 Index, declining 16.29% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Greenhill 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 12.8% when compared to the same quarter one year prior, going from $77.44 million to $87.32 million.
- The debt-to-equity ratio is somewhat low, currently at 0.95, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that PBF's debt-to-equity ratio is low, the quick ratio, which is currently 0.64, displays a potential problem in covering short-term cash needs.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 36.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of PBF ENERGY INC has not done very well: it is down 7.93% 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. 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.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PBF ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full PBF Energy Ratings Report.
- RDS.B's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
- ROYAL DUTCH SHELL PLC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, ROYAL DUTCH SHELL PLC reported lower earnings of $4.70 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($7.17 versus $4.70).
- Net operating cash flow has decreased to $7,106.00 million or 49.18% when compared to the same quarter last year. Despite a decrease in cash flow of 49.18%, ROYAL DUTCH SHELL PLC is in line with the industry average cash flow growth rate of -53.34%.
- Looking at the price performance of RDS.B's shares over the past 12 months, there is not much good news to report: the stock is down 26.51%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full Royal Dutch Shell Ratings Report.
- Our dividend calendar.