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." Pattern Energy Group Dividend Yield: 4.60% Pattern Energy Group (NASDAQ: PEGI) shares currently have a dividend yield of 4.60%. Pattern Energy Group Inc., an independent power company, owns and operates power projects in the United States, Canada, and Chile. As of March 2, 2015, the company owned interests in 12 wind power projects with the capacity of 1,636 megawatts. It sells electricity primarily to local utilities. The average volume for Pattern Energy Group has been 606,900 shares per day over the past 30 days. Pattern Energy Group has a market cap of $2.1 billion and is part of the utilities industry. Shares are up 23.4% year-to-date as of the close of trading on Wednesday. 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 Pattern Energy Group as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 30.9%. 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.
- Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, PATTERN ENERGY GROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for PATTERN ENERGY GROUP INC is rather high; currently it is at 61.08%. Regardless of PEGI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PEGI's net profit margin of -30.67% significantly underperformed when compared to the industry average.
- Net operating cash flow has declined marginally to $16.24 million or 1.01% when compared to the same quarter last year. Despite a decrease in cash flow PATTERN ENERGY GROUP INC is still fairing well by exceeding its industry average cash flow growth rate of -23.66%.
- In its most recent trading session, PEGI 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. 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.
- You can view the full Pattern Energy Group Ratings Report.
- CIM's very impressive revenue growth greatly exceeded the industry average of 8.4%. Since the same quarter one year prior, revenues leaped by 82.1%. 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 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 Real Estate Investment Trusts (REITs) industry and the overall market, CHIMERA INVESTMENT CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for CHIMERA INVESTMENT CORP is currently very high, coming in at 89.26%. Regardless of CIM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 25.56% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 33.2% when compared to the same quarter one year ago, falling from $100.37 million to $67.04 million.
- Net operating cash flow has decreased to $34.01 million or 46.88% 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.
- You can view the full Chimera Investment Ratings Report.
- The gross profit margin for PHILIP MORRIS INTERNATIONAL is rather high; currently it is at 68.88%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.13% is above that of the industry average.
- Despite the weak revenue results, PM has outperformed against the industry average of 23.1%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- PHILIP MORRIS INTERNATIONAL' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, PHILIP MORRIS INTERNATIONAL reported lower earnings of $4.76 versus $5.26 in the prior year. For the next year, the market is expecting a contraction of 7.1% in earnings ($4.42 versus $4.76).
- Net operating cash flow has significantly decreased to -$375.00 million or 152.44% 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 Philip Morris International Ratings Report.
- Our dividend calendar.