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 "Sell."Wi-Lan Dividend Yield: 7.30% Wi-Lan (NASDAQ: WILN) shares currently have a dividend yield of 7.30%. Wi-LAN Inc., an intellectual property licensing company, develops, acquires, and licenses various patented technologies, which are used in products in the communications and consumer electronics markets. The company has a P/E ratio of 232.00. The average volume for Wi-Lan has been 144,900 shares per day over the past 30 days. Wi-Lan has a market cap of $279.0 million and is part of the telecommunications industry. Shares are down 22.4% 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 Wi-Lan as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, unimpressive growth in net income and weak operating cash flow. Highlights from the ratings report include:
- The share price of WI-LAN INC has not done very well: it is down 23.01% 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, 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.
- 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 Communications Equipment industry. The net income has significantly decreased by 219.9% when compared to the same quarter one year ago, falling from $3.97 million to -$4.76 million.
- Net operating cash flow has significantly decreased to $2.36 million or 88.96% 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 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 Communications Equipment industry and the overall market on the basis of return on equity, WI-LAN INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 48.06% is the gross profit margin for WI-LAN INC 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, WILN's net profit margin of -23.31% significantly underperformed when compared to the industry average.
- You can view the full Wi-Lan Ratings Report.
- 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 221.9% when compared to the same quarter one year ago, falling from $13.37 million to -$16.31 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $6.47 million or 55.40% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- In its most recent trading session, ANH 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.
- ANWORTH MTG ASSET 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ANWORTH MTG ASSET CORP reported lower earnings of $0.18 versus $0.49 in the prior year. This year, the market expects an improvement in earnings ($0.29 versus $0.18).
- You can view the full Anworth Mortgage Asset Ratings Report.
- 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 Computers & Peripherals industry average. The net income has significantly decreased by 27.5% when compared to the same quarter one year ago, falling from $1.08 million to $0.78 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CCUR has underperformed the S&P 500 Index, declining 15.60% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- CONCURRENT COMPUTER CP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, CONCURRENT COMPUTER CP increased its bottom line by earning $2.04 versus $0.49 in the prior year.
- The revenue fell significantly faster than the industry average of 33.1%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for CONCURRENT COMPUTER CP is rather high; currently it is at 61.62%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CCUR's net profit margin of 4.58% significantly trails the industry average.
- You can view the full Concurrent Computer Ratings Report.
- Our dividend calendar.