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." Select Income REIT Dividend Yield: 6.10% Select Income REIT (NYSE: SIR) shares currently have a dividend yield of 6.10%. Select Income REIT, a real estate investment trust (REIT), primarily owns and invests in single tenant and net leased properties. The company has a P/E ratio of 15.65. The average volume for Select Income REIT has been 557,700 shares per day over the past 30 days. Select Income REIT has a market cap of $2.0 billion and is part of the real estate industry. Shares are down 9% 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 Select Income REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and good cash flow from operations. 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:
- SIR's very impressive revenue growth greatly exceeded the industry average of 8.4%. Since the same quarter one year prior, revenues leaped by 78.5%. 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.
- 35.80% is the gross profit margin for SELECT INCOME REIT 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, SIR's net profit margin of 4.20% is significantly lower than the industry average.
- 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 84.1% when compared to the same quarter one year ago, falling from $25.06 million to $3.98 million.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, SELECT INCOME REIT underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Select Income REIT Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 8.8% when compared to the same quarter one year prior, going from $340.00 million to $370.00 million.
- 44.68% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.22% is above that of the industry average.
- The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that POT's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs.
- POT has underperformed the S&P 500 Index, declining 18.79% 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.
- Net operating cash flow has declined marginally to $521.00 million or 3.33% 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 Potash Corp of Saskatchewan Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 2025.0% when compared to the same quarter one year prior, rising from -$1.20 million to $23.10 million.
- REGAL ENTERTAINMENT GROUP 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, REGAL ENTERTAINMENT GROUP reported lower earnings of $0.68 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus $0.68).
- RGC, with its decline in revenue, slightly underperformed the industry average of 3.9%. Since the same quarter one year prior, revenues slightly dropped by 4.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has decreased to $101.90 million or 20.39% 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.
- In its most recent trading session, RGC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 Regal Entertainment Group Ratings Report.
- Our dividend calendar.