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 "Buy."RR Donnelley & Sons Dividend Yield: 6.50% RR Donnelley & Sons (NASDAQ: RRD) shares currently have a dividend yield of 6.50%. R.R. Donnelley & Sons Company provides integrated communications solutions to private and public sector clients in the United States and internationally. The company operates through Publishing and Retail Services, Variable Print, Strategic Services, and International segments. The company has a P/E ratio of 22.08. The average volume for RR Donnelley & Sons has been 1,669,600 shares per day over the past 30 days. RR Donnelley & Sons has a market cap of $3.4 billion and is part of the diversified services industry. Shares are down 5.5% year-to-date as of the close of trading on Thursday. 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 RR Donnelley & Sons as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- 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 Commercial Services & Supplies industry and the overall market, DONNELLEY (R R) & SONS CO's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $205.30 million or 36.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 16.57%.
- DONNELLEY (R R) & SONS CO's earnings per share declined by 34.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, DONNELLEY (R R) & SONS CO reported lower earnings of $0.58 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus $0.58).
- RRD, with its decline in revenue, slightly underperformed the industry average of 5.2%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Commercial Services & Supplies industry average, but is less than that of the S&P 500. The net income has significantly decreased by 32.8% when compared to the same quarter one year ago, falling from $64.70 million to $43.50 million.
- You can view the full RR Donnelley & Sons Ratings Report.
- T's revenue growth has slightly outpaced the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 1.4%. 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.
- Net operating cash flow has increased to $9,160.00 million or 13.50% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.62%.
- The gross profit margin for AT&T INC is rather high; currently it is at 54.14%. Regardless of T'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 9.22% trails the industry average.
- Even though the current debt-to-equity ratio is 1.31, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.86 is weak.
- AT&T INC's earnings per share declined by 14.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.19 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $1.19).
- You can view the full AT&T Ratings Report.
- HIMX's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.37, which illustrates the ability to avoid short-term cash problems.
- HIMX, with its decline in revenue, slightly underperformed the industry average of 10.6%. Since the same quarter one year prior, revenues fell by 13.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- In its most recent trading session, HIMX 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- HIMAX TECHNOLOGIES INC 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, HIMAX TECHNOLOGIES INC increased its bottom line by earning $0.39 versus $0.35 in the prior year. For the next year, the market is expecting a contraction of 25.6% in earnings ($0.29 versus $0.39).
- 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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 63.4% when compared to the same quarter one year ago, falling from $24.11 million to $8.83 million.
- You can view the full Himax Technologies Ratings Report.
- Our dividend calendar.