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." Healthcare Realty Dividend Yield: 5.10% Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 5.10%. Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The company has a P/E ratio of 73.44. The average volume for Healthcare Realty has been 695,200 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.4 billion and is part of the real estate industry. Shares are down 14.3% 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 Healthcare Realty as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 39.7% when compared to the same quarter one year prior, rising from $3.85 million to $5.38 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 6.5%. 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.
- HEALTHCARE REALTY TRUST INC's earnings per share declined by 37.5% 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, HEALTHCARE REALTY TRUST INC turned its bottom line around by earning $0.35 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus $0.35).
- The gross profit margin for HEALTHCARE REALTY TRUST INC is rather low; currently it is at 24.21%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.57% significantly trails the industry average.
- The share price of HEALTHCARE REALTY TRUST INC has not done very well: it is down 6.53% 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 Healthcare Realty Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 105.0% when compared to the same quarter one year prior, rising from $42.33 million to $86.78 million.
- Net operating cash flow has significantly increased by 800.06% to $180.55 million when compared to the same quarter last year. In addition, NGL ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -53.28%.
- NGL ENERGY PARTNERS LP reported significant earnings per share improvement 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, NGL ENERGY PARTNERS LP swung to a loss, reporting -$0.44 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus -$0.44).
- The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NGL maintains a poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, NGL ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full NGL Energy Partners Ratings Report.
- RDS.B's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
- ROYAL DUTCH SHELL PLC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, ROYAL DUTCH SHELL PLC reported lower earnings of $4.70 versus $5.18 in the prior year. This year, the market expects an improvement in earnings ($7.41 versus $4.70).
- Net operating cash flow has decreased to $7,106.00 million or 49.18% when compared to the same quarter last year. Despite a decrease in cash flow of 49.18%, ROYAL DUTCH SHELL PLC is in line with the industry average cash flow growth rate of -53.28%.
- Looking at the price performance of RDS.B's shares over the past 12 months, there is not much good news to report: the stock is down 27.58%, 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. 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.
- You can view the full Royal Dutch Shell Ratings Report.
- Our dividend calendar.