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."Ocean Rig UDW Dividend Yield: 9.10% Ocean Rig UDW (NASDAQ: ORIG) shares currently have a dividend yield of 9.10%. Ocean Rig UDW Inc., an offshore drilling contractor, provides oilfield services for offshore oil and gas exploration, development, and production drilling. It specializes in the ultra-deepwater and harsh-environment segment of the offshore drilling industry. The company has a P/E ratio of 3.66. The average volume for Ocean Rig UDW has been 872,100 shares per day over the past 30 days. Ocean Rig UDW has a market cap of $1.1 billion and is part of the energy industry. Shares are down 14.4% 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 Ocean Rig UDW as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.6%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 2771.5% when compared to the same quarter one year prior, rising from -$1.54 million to $41.14 million.
- OCEAN RIG UDW INC 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, OCEAN RIG UDW INC increased its bottom line by earning $1.97 versus $0.48 in the prior year. For the next year, the market is expecting a contraction of 26.4% in earnings ($1.45 versus $1.97).
- ORIG'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 48.00%, 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. 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.
- Currently the debt-to-equity ratio of 1.51 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated.
- You can view the full Ocean Rig UDW Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 57.0% when compared to the same quarter one year prior, rising from $13.26 million to $20.82 million.
- The gross profit margin for TICC CAPITAL CORP is currently very high, coming in at 79.32%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 95.75% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $19.49 million or 5.03% when compared to the same quarter last year. Despite an increase in cash flow of 5.03%, TICC CAPITAL CORP is still growing at a significantly lower rate than the industry average of 190.66%.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market, TICC CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- TICC'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 25.69%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full TICC Capital Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for DYNEX CAPITAL INC is currently very high, coming in at 83.26%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -37.23% is in-line with the industry average.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 1190.5% when compared to the same quarter one year ago, falling from -$0.73 million to -$9.47 million.
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DYNEX CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Dynex Capital Ratings Report.
- Our dividend calendar.