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." Guess Dividend Yield: 4.50% Guess (NYSE: GES) shares currently have a dividend yield of 4.50%. Guess , Inc. designs, markets, distributes, and licenses lifestyle collections of contemporary apparel and accessories for men, women, and children that reflect the American lifestyle and European fashion sensibilities. The company has a P/E ratio of 16.90. The average volume for Guess has been 1,851,000 shares per day over the past 30 days. Guess has a market cap of $1.7 billion and is part of the retail industry. Shares are down 8.3% year-to-date as of the close of trading on Monday. 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 Guess as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins. 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 Specialty Retail industry. The net income increased by 259.0% when compared to the same quarter one year prior, rising from -$2.10 million to $3.34 million.
- GES's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GES has a quick ratio of 2.30, which demonstrates the ability of the company to cover short-term liquidity needs.
- GES, with its decline in revenue, underperformed when compared the industry average of 9.1%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- GES has underperformed the S&P 500 Index, declining 21.74% 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.
- 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. In comparison to the other companies in the Specialty Retail industry and the overall market, GUESS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Guess Ratings Report.
- The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 32.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 20.1% when compared to the same quarter one year ago, dropping from $3,335.00 million to $2,663.00 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 Oil, Gas & Consumable Fuels industry and the overall market, TOTAL SA's return on equity significantly trails that of both the industry average and the S&P 500.
- Looking at the price performance of TOT's shares over the past 12 months, there is not much good news to report: the stock is down 27.20%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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 Total Ratings Report.
- 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 21.9%. 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 33.13%, 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.
- Our dividend calendar.