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."Greenhill Dividend Yield: 5.00% Greenhill (NYSE: GHL) shares currently have a dividend yield of 5.00%. Greenhill & Co., Inc., together with its subsidiaries, operates as an independent investment bank for corporations, partnerships, institutions, and governments worldwide. The company has a P/E ratio of 21.15. The average volume for Greenhill has been 348,900 shares per day over the past 30 days. Greenhill has a market cap of $1.1 billion and is part of the financial services industry. Shares are down 17.4% 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 Greenhill as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, premium valuation and poor profit margins. Highlights from the ratings report include:
- GHL's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 16.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, GREENHILL & CO INC's return on equity exceeds that of both the industry average and the S&P 500.
- GREENHILL & CO INC has improved earnings per share by 11.1% in the most recent quarter compared to 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, GREENHILL & CO INC reported lower earnings of $1.45 versus $1.56 in the prior year. This year, the market expects an improvement in earnings ($1.79 versus $1.45).
- GHL has underperformed the S&P 500 Index, declining 23.05% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Greenhill Ratings Report.
- The revenue growth greatly exceeded the industry average of 22.5%. Since the same quarter one year prior, revenues rose by 12.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, ATW has a quick ratio of 2.24, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, ATWOOD OCEANICS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- ATW's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 64.39%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- Net operating cash flow has decreased to $133.86 million or 22.51% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ATWOOD OCEANICS has marginally lower results.
- You can view the full Atwood Oceanics Ratings Report.
- Net operating cash flow has increased to $209.80 million or 49.43% when compared to the same quarter last year. In addition, TARGA RESOURCES PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -20.54%.
- The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.88%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 98.43% compared to the year-earlier quarter. 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.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, TARGA RESOURCES PARTNERS LP'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 Targa Resources Partners Ratings Report.
- Our dividend calendar.