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." Gazit-Globe Dividend Yield: 14.70% Gazit-Globe (NYSE: GZT) shares currently have a dividend yield of 14.70%. Gazit-Globe Ltd., through its subsidiaries, acquires, owns, develops, operates, and redevelops supermarket-anchored shopping centers and retail properties in North America, Europe, Israel, and Brazil. The average volume for Gazit-Globe has been 4,300 shares per day over the past 30 days. Gazit-Globe has a market cap of $2.2 billion and is part of the real estate industry. Shares are up 5.5% 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 Gazit-Globe as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity. 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 Real Estate Management & Development industry. The net income increased by 111.1% when compared to the same quarter one year prior, rising from $44.95 million to $94.90 million.
- GZT's revenue growth trails the industry average of 19.3%. Since the same quarter one year prior, revenues slightly increased by 6.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- GAZIT GLOBE reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, GAZIT GLOBE reported lower earnings of $0.10 versus $1.51 in the prior year.
- The debt-to-equity ratio is very high at 5.32 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, GZT maintains a poor quick ratio of 0.73, which illustrates the inability to avoid short-term cash problems.
- 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 Real Estate Management & Development industry and the overall market on the basis of return on equity, GAZIT GLOBE underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Gazit-Globe Ratings Report.