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." CYS Investments Dividend Yield: 13.30% CYS Investments (NYSE: CYS) shares currently have a dividend yield of 13.30%. CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The company has a P/E ratio of 4.14. The average volume for CYS Investments has been 1,439,900 shares per day over the past 30 days. CYS Investments has a market cap of $1.3 billion and is part of the real estate industry. Shares are down 4.7% 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 CYS Investments as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for CYS INVESTMENTS INC is currently very high, coming in at 92.88%. Regardless of CYS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CYS's net profit margin of 67.49% significantly outperformed against the industry.
- The share price of CYS INVESTMENTS INC has not done very well: it is down 8.57% 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. 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, 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 58.2% when compared to the same quarter one year ago, falling from $130.69 million to $54.60 million.
- You can view the full CYS Investments Ratings Report.
- ARTISAN PARTNERS ASSET MGMT 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARTISAN PARTNERS ASSET MGMT continued to lose money by earning -$0.72 versus -$2.02 in the prior year. This year, the market expects an improvement in earnings ($2.96 versus -$0.72).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 126.0% when compared to the same quarter one year prior, rising from $8.64 million to $19.51 million.
- Net operating cash flow has decreased to $128.71 million or 12.57% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- APAM has underperformed the S&P 500 Index, declining 16.58% from its price level of one year ago. 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 Artisan Partners Asset Management Ratings Report.
- The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 18.8%. 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.
- 40.92% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FTR's net profit margin of -3.71% significantly underperformed when compared to the industry average.
- FRONTIER COMMUNICATIONS CORP 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. Stable earnings per share over the past two years indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than the prior full year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP increased its bottom line by earning $0.13 versus $0.12 in the prior year. For the next year, the market is expecting a contraction of 23.1% in earnings ($0.10 versus $0.13).
- Net operating cash flow has decreased to $249.00 million or 20.41% 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.
- The share price of FRONTIER COMMUNICATIONS CORP has not done very well: it is down 12.90% 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Frontier Communications Ratings Report.
- Our dividend calendar.