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." Leju Holdings Dividend Yield: 8.70% Leju Holdings (NYSE: LEJU) shares currently have a dividend yield of 8.70%. Leju Holdings Limited, through its subsidiaries, provides online real estate services in the People's Republic of China. The company has a P/E ratio of 13.46. The average volume for Leju Holdings has been 624,200 shares per day over the past 30 days. Leju Holdings has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 14.9% 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 Leju Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and weak operating cash flow. Highlights from the ratings report include:
- 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 Internet Software & Services industry. The net income has significantly decreased by 337.4% when compared to the same quarter one year ago, falling from $2.24 million to -$5.32 million.
- Net operating cash flow has significantly decreased to -$24.20 million or 461.19% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- LEJU HOLDINGS LTD -ADR 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. This year, the market expects an improvement in earnings ($0.65 versus $0.50).
- The gross profit margin for LEJU HOLDINGS LTD -ADR is currently very high, coming in at 84.13%. Regardless of LEJU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LEJU's net profit margin of -5.68% significantly underperformed when compared to the industry average.
- The share price of LEJU HOLDINGS LTD -ADR has not done very well: it is down 20.42% 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.
- You can view the full Leju Holdings Ratings Report.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RAIT FINANCIAL TRUST is rather low; currently it is at 19.46%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 0.92% significantly trails the industry average.
- Net operating cash flow has significantly decreased to -$12.99 million or 158.31% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- RAS has underperformed the S&P 500 Index, declining 20.60% 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.
- RAIT FINANCIAL TRUST 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, RAIT FINANCIAL TRUST continued to lose money by earning -$3.88 versus -$4.58 in the prior year. This year, the market expects an improvement in earnings (-$0.26 versus -$3.88).
- You can view the full Rait Financial Ratings Report.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 67.2% when compared to the same quarter one year ago, falling from $58.00 million to $19.00 million.
- Net operating cash flow has decreased to $153.00 million or 45.16% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.82%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 83.33% 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.
- Even though the current debt-to-equity ratio is 1.26, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Despite the fact that TAC's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.58 is low and demonstrates weak liquidity.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, TRANSALTA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full TransAlta Ratings Report.
- Our dividend calendar.