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." Potash Corp of Saskatchewan Dividend Yield: 4.70% Potash Corp of Saskatchewan (NYSE: POT) shares currently have a dividend yield of 4.70%. Potash Corporation of Saskatchewan Inc., together with its subsidiaries, produces and sells fertilizers and related industrial and feed products worldwide. The company operates in three segments: Potash, Nitrogen, and Phosphate. The company has a P/E ratio of 17.30. The average volume for Potash Corp of Saskatchewan has been 4,011,700 shares per day over the past 30 days. Potash Corp of Saskatchewan has a market cap of $26.8 billion and is part of the chemicals industry. Shares are down 8.5% 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 Potash Corp of Saskatchewan as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 8.8% when compared to the same quarter one year prior, going from $340.00 million to $370.00 million.
- 44.68% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.22% is above that of the industry average.
- The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that POT's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs.
- POT has underperformed the S&P 500 Index, declining 10.05% from its price level of one year ago. 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.
- Net operating cash flow has declined marginally to $521.00 million or 3.33% 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.
- You can view the full Potash Corp of Saskatchewan 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 4.3%. 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 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, GOVERNMENT PPTYS INCOME TR's return on equity significantly trails that of both the industry average and the S&P 500.
- GOVERNMENT PPTYS INCOME TR 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. 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, GOVERNMENT PPTYS INCOME TR reported lower earnings of $0.87 versus $1.02 in the prior year. For the next year, the market is expecting a contraction of 12.6% in earnings ($0.76 versus $0.87).
- 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 319.7% when compared to the same quarter one year ago, falling from $15.19 million to -$33.37 million.
- You can view the full Government Properties Income Ratings Report.
- The revenue fell significantly faster than the industry average of 5.6%. Since the same quarter one year prior, revenues fell by 43.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- APOLLO GLOBAL MANAGEMENT LLC 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, APOLLO GLOBAL MANAGEMENT LLC reported lower earnings of $0.64 versus $3.97 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $0.64).
- 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 Capital Markets industry. The net income has significantly decreased by 57.1% when compared to the same quarter one year ago, falling from $72.17 million to $30.93 million.
- The gross profit margin for APOLLO GLOBAL MANAGEMENT LLC is currently lower than what is desirable, coming in at 25.58%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 11.17% significantly trails the industry average.
- The share price of APOLLO GLOBAL MANAGEMENT LLC has not done very well: it is down 11.12% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Apollo Global Management Ratings Report.
- Our dividend calendar.