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." Greenhill Dividend Yield: 4.50% Greenhill (NYSE: GHL) shares currently have a dividend yield of 4.50%. Greenhill & Co., Inc., together with its subsidiaries, operates as an independent investment bank for corporations, partnerships, institutions, and governments worldwide. The company has a P/E ratio of 24.04. The average volume for Greenhill has been 258,700 shares per day over the past 30 days. Greenhill has a market cap of $1.2 billion and is part of the financial services industry. Shares are down 6.6% 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 Greenhill as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 42.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, GREENHILL & CO INC's return on equity exceeds that of both the industry average and the S&P 500.
- GREENHILL & CO INC 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, GREENHILL & CO INC reported lower earnings of $1.45 versus $1.56 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.45).
- Net operating cash flow has decreased to $17.40 million or 22.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- GHL has underperformed the S&P 500 Index, declining 16.86% from its price level of one year ago. 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 Greenhill Ratings Report.