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 "Sell." Bank of Nova Scotia Dividend Yield: 4.10% Bank of Nova Scotia (NYSE: BNS) shares currently have a dividend yield of 4.10%. The Bank of Nova Scotia provides various personal, commercial, corporate, and investment banking services in Canada and internationally. The company has a P/E ratio of 11.36. The average volume for Bank of Nova Scotia has been 756,800 shares per day over the past 30 days. Bank of Nova Scotia has a market cap of $65.1 billion and is part of the banking industry. Shares are down 6.5% year-to-date as of the close of trading on Friday. 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 Bank of Nova Scotia as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has significantly decreased to -$2,077.00 million or 128.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- BNS has underperformed the S&P 500 Index, declining 17.08% 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.
- BANK OF NOVA SCOTIA's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, BANK OF NOVA SCOTIA increased its bottom line by earning $5.66 versus $1.29 in the prior year.
- The gross profit margin for BANK OF NOVA SCOTIA is currently very high, coming in at 73.25%. Regardless of BNS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 22.96% trails the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 0.9% when compared to the same quarter one year prior, going from $1,742.00 million to $1,757.00 million.
- You can view the full Bank of Nova Scotia Ratings Report.
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 120.9% when compared to the same quarter one year ago, falling from $43.42 million to -$9.08 million.
- 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 Energy Equipment & Services industry and the overall market, TIDEWATER INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 56.83%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 121.59% compared to 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.
- TIDEWATER INC 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, TIDEWATER INC swung to a loss, reporting -$1.40 versus $2.83 in the prior year. This year, the market expects an improvement in earnings ($0.36 versus -$1.40).
- TDW, with its decline in revenue, underperformed when compared the industry average of 1.7%. Since the same quarter one year prior, revenues fell by 11.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Tidewater Ratings Report.
- The gross profit margin for THERAVANCE INC is currently extremely low, coming in at 11.19%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -154.68% is significantly below that of the industry average.
- THRX'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 28.83%, 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.
- THERAVANCE INC has improved earnings per share by 40.0% 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, THERAVANCE INC reported poor results of -$0.66 versus -$0.30 in the prior year. This year, the market expects an improvement in earnings (-$0.15 versus -$0.66).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Pharmaceuticals industry average. The net income increased by 84.2% when compared to the same quarter one year prior, rising from -$67.70 million to -$10.67 million.
- Net operating cash flow has significantly increased by 96.80% to -$1.62 million when compared to the same quarter last year. In addition, THERAVANCE INC has also vastly surpassed the industry average cash flow growth rate of -23.98%.
- You can view the full Theravance Ratings Report.
- Our dividend calendar.