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."Copa Holdings Dividend Yield: 6.50% Copa Holdings (NYSE: CPA) shares currently have a dividend yield of 6.50%. Copa Holdings, S.A. provides airline passenger and cargo services in Latin America. It offers services within Colombia; and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala, and Costa Rica. The company has a P/E ratio of 7.02. The average volume for Copa Holdings has been 584,200 shares per day over the past 30 days. Copa Holdings has a market cap of $1.7 billion and is part of the transportation industry. Shares are down 52.3% year-to-date as of the close of trading on Tuesday. 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 Copa Holdings as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. 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:
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
- CPA, with its decline in revenue, underperformed when compared the industry average of 7.1%. Since the same quarter one year prior, revenues fell by 20.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Airlines industry and the overall market, COPA HOLDINGS SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for COPA HOLDINGS SA is rather low; currently it is at 15.42%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 11.90% trails that of the industry average.
- You can view the full Copa Holdings Ratings Report.
- RDS.A's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- RDS.A, with its decline in revenue, slightly underperformed the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 34.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has decreased to $6,050.00 million or 29.98% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ROYAL DUTCH SHELL PLC has marginally lower results.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, ROYAL DUTCH SHELL PLC'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 Royal Dutch Shell Ratings Report.
- The revenue growth greatly exceeded the industry average of 34.6%. Since the same quarter one year prior, revenues slightly increased by 7.8%. 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 significantly increased by 75.12% to $181.67 million when compared to the same quarter last year. In addition, TEEKAY CORP has also vastly surpassed the industry average cash flow growth rate of -20.54%.
- TEEKAY 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. 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, TEEKAY CORP continued to lose money by earning -$0.77 versus -$1.62 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus -$0.77).
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1900.8% when compared to the same quarter one year ago, falling from -$0.49 million to -$9.76 million.
- The debt-to-equity ratio is very high at 6.73 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, TK maintains a poor quick ratio of 0.74, which illustrates the inability to avoid short-term cash problems.
- You can view the full Teekay Ratings Report.
- Our dividend calendar.