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."PDL BioPharma Dividend Yield: 9.00% PDL BioPharma (NASDAQ: PDLI) shares currently have a dividend yield of 9.00%. PDL BioPharma, Inc. manages a portfolio of patents and royalty assets in the United States and Europe. The company is involved in the humanization of monoclonal antibodies and the discovery of a new generation of targeted treatments for cancer and immunologic diseases. It offers Queen et al. The company has a P/E ratio of 3.48. The average volume for PDL BioPharma has been 3,544,000 shares per day over the past 30 days. PDL BioPharma has a market cap of $1.1 billion and is part of the drugs industry. Shares are down 13.4% 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 PDL BioPharma as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk. Highlights from the ratings report include:
- PDL BIOPHARMA INC has improved earnings per share by 13.6% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PDL BIOPHARMA INC increased its bottom line by earning $1.89 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($2.11 versus $1.89).
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.5%. Since the same quarter one year prior, revenues rose by 15.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for PDL BIOPHARMA INC is currently very high, coming in at 94.00%. Regardless of PDLI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PDLI's net profit margin of 66.11% significantly outperformed against the industry.
- PDLI'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 26.97%, 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. 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.
- Net operating cash flow has decreased to $71.85 million or 21.71% 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 PDL BioPharma Ratings Report.
- PKY's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 15.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PARKWAY PROPERTIES 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, PARKWAY PROPERTIES INC turned its bottom line around by earning $0.29 versus -$0.60 in the prior year. For the next year, the market is expecting a contraction of 124.1% in earnings (-$0.07 versus $0.29).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 32.9% when compared to the same quarter one year ago, falling from $10.85 million to $7.28 million.
- PKY has underperformed the S&P 500 Index, declining 12.10% from its price level of one year ago. 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 Parkway Properties Ratings Report.
- The revenue growth greatly exceeded the industry average of 16.2%. Since the same quarter one year prior, revenues rose by 30.9%. 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.
- Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, PATTERN ENERGY GROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for PATTERN ENERGY GROUP INC is rather high; currently it is at 61.08%. Regardless of PEGI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PEGI's net profit margin of -30.67% significantly underperformed when compared to the industry average.
- Net operating cash flow has declined marginally to $16.24 million or 1.01% when compared to the same quarter last year. Despite a decrease in cash flow PATTERN ENERGY GROUP INC is still fairing well by exceeding its industry average cash flow growth rate of -40.81%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PEGI has underperformed the S&P 500 Index, declining 5.77% 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.
- You can view the full Pattern Energy Group Ratings Report.
- Our dividend calendar.