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."National Oilwell Varco Dividend Yield: 4.70% National Oilwell Varco (NYSE: NOV) shares currently have a dividend yield of 4.70%. National Oilwell Varco, Inc. designs, manufactures, and sells equipment and components used in oil and gas drilling, completion, and production; and provides oilfield services to the upstream oil and gas industry worldwide. The company has a P/E ratio of 8.50. The average volume for National Oilwell Varco has been 5,252,900 shares per day over the past 30 days. National Oilwell Varco has a market cap of $15.0 billion and is part of the energy industry. Shares are down 43.2% year-to-date as of the close of trading on Friday. 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 National Oilwell Varco as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- NOV's debt-to-equity ratio is very low at 0.23 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 1.06, which illustrates the ability to avoid short-term cash problems.
- NOV, with its decline in revenue, slightly underperformed the industry average of 22.5%. Since the same quarter one year prior, revenues fell by 25.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has significantly decreased to $194.00 million or 77.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, NATIONAL OILWELL VARCO INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full National Oilwell Varco Ratings Report.
- TD's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 4.4%. 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.
- The gross profit margin for TORONTO DOMINION BANK is currently very high, coming in at 83.71%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.08% is above that of the industry average.
- Net operating cash flow has significantly increased by 97.22% to -$335.00 million when compared to the same quarter last year. Despite an increase in cash flow of 97.22%, TORONTO DOMINION BANK is still growing at a significantly lower rate than the industry average of 631.13%.
- Looking at the price performance of TD's shares over the past 12 months, there is not much good news to report: the stock is down 25.82%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Commercial Banks industry average, but is greater than that of the S&P 500. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from $1,962.00 million to $1,831.00 million.
- You can view the full Toronto-Dominion Bank Ratings Report.
- PKY's revenue growth has slightly outpaced the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 15.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- PARKWAY PROPERTIES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PARKWAY PROPERTIES INC turned its bottom line around by earning $0.29 versus -$0.60 in the prior year. For the next year, the market is expecting a contraction of 24.1% in earnings ($0.22 versus $0.29).
- PKY has underperformed the S&P 500 Index, declining 18.49% 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.
- The gross profit margin for PARKWAY PROPERTIES INC is currently extremely low, coming in at 9.56%. Regardless of PKY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PKY's net profit margin of 11.07% is significantly lower than the industry average.
- You can view the full Parkway Properties Ratings Report.
- Our dividend calendar.