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."PennyMac Mortgage Investment Dividend Yield: 13.00% PennyMac Mortgage Investment (NYSE: PMT) shares currently have a dividend yield of 13.00%. PennyMac Mortgage Investment Trust, a specialty finance company, invests primarily in residential mortgage loans and mortgage-related assets in the United States. The company operates through two segments, Correspondent Production and Investment Activities. The company has a P/E ratio of 9.14. The average volume for PennyMac Mortgage Investment has been 601,500 shares per day over the past 30 days. PennyMac Mortgage Investment has a market cap of $1.4 billion and is part of the real estate industry. Shares are down 10.2% 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 PennyMac Mortgage Investment as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- 49.71% is the gross profit margin for PENNYMAC MORTGAGE INVEST TR which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PMT's net profit margin of 11.84% is significantly lower than the industry average.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PENNYMAC MORTGAGE INVEST TR's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$753.13 million or 764.70% 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 PennyMac Mortgage Investment Ratings Report.
- STNG's very impressive revenue growth greatly exceeded the industry average of 38.7%. Since the same quarter one year prior, revenues leaped by 109.4%. 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.
- The gross profit margin for SCORPIO TANKERS INC is rather high; currently it is at 57.50%. It has increased significantly from the same period last year. Along with this, the net profit margin of 25.32% significantly outperformed against the industry average.
- SCORPIO TANKERS INC's earnings per share declined by 10.7% 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, SCORPIO TANKERS INC increased its bottom line by earning $0.27 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($0.94 versus $0.27).
- The debt-to-equity ratio of 1.48 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, STNG maintains a poor quick ratio of 0.87, 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, SCORPIO TANKERS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Scorpio Tankers Ratings Report.
- The revenue growth greatly exceeded the industry average of 38.7%. Since the same quarter one year prior, revenues slightly increased by 6.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, BPT has a quick ratio of 1.92, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.72% significantly outperformed against the industry.
- BPT'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 37.44%, 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.
- You can view the full BP Prudhoe Bay Royalty Ratings Report.
- Our dividend calendar.