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."H&E Equipment Services Dividend Yield: 5.90% H&E Equipment Services (NASDAQ: HEES) shares currently have a dividend yield of 5.90%. H&E Equipment Services, Inc. operates as an integrated equipment services company. The company rents, sells, and provides parts and service support for hi-lift or aerial work platform equipment, crane, earthmoving equipment, and industrial lift truck categories. The company has a P/E ratio of 13.35. The average volume for H&E Equipment Services has been 487,700 shares per day over the past 30 days. H&E Equipment Services has a market cap of $658.9 million and is part of the diversified services industry. Shares are down 26.3% year-to-date as of the close of trading on Monday. 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 H&E Equipment Services as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 48.26% is the gross profit margin for H&E EQUIPMENT SERVICES INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.37% trails the industry average.
- Net operating cash flow has slightly increased to $55.08 million or 6.50% when compared to the same quarter last year. Despite an increase in cash flow, H&E EQUIPMENT SERVICES INC's cash flow growth rate is still lower than the industry average growth rate of 30.79%.
- HEES, with its decline in revenue, slightly underperformed the industry average of 2.8%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Trading Companies & Distributors industry average. The net income has significantly decreased by 27.0% when compared to the same quarter one year ago, falling from $15.73 million to $11.48 million.
- The debt-to-equity ratio is very high at 7.13 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full H&E Equipment Services Ratings Report.
- CM's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 3.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has significantly increased by 34283.72% to $14,785.00 million when compared to the same quarter last year. In addition, CANADIAN IMPERIAL BANK has also vastly surpassed the industry average cash flow growth rate of 1371.99%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 6.0% when compared to the same quarter one year prior, going from $918.00 million to $973.00 million.
- 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. Compared to other companies in the Commercial Banks industry and the overall market, CANADIAN IMPERIAL BANK's return on equity exceeds that of both the industry average and the S&P 500.
- CM'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 25.51%, 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.
- You can view the full Canadian Imperial Bank of Commerce Ratings Report.
- The gross profit margin for MARKWEST ENERGY PARTNERS LP is rather high; currently it is at 53.40%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -22.08% is in-line with the industry average.
- Despite the weak revenue results, MWE has outperformed against the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 11.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, MARKWEST ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $162.40 million or 33.56% 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 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 1230.5% when compared to the same quarter one year ago, falling from $8.98 million to -$101.49 million.
- You can view the full MarkWest Energy Partners Ratings Report.
- Our dividend calendar.