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."BanColombia Dividend Yield: 4.20% BanColombia (NYSE: CIB) shares currently have a dividend yield of 4.20%. Bancolombia S.A. provides various banking products and services to individual, corporate, and government customers. The company operates through Banking Colombia, Banking Panama, Banking El Salvador, Leasing, Trust, Investment Banking, Brokerage, Off Shore, Insurance, and All Other segments. The average volume for BanColombia has been 329,900 shares per day over the past 30 days. BanColombia has a market cap of $7.9 billion and is part of the banking industry. Shares are down 31.1% 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 BanColombia as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including unimpressive growth in net income, feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for BANCOLOMBIA SA is rather high; currently it is at 66.09%. 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 16.96% trails the industry average.
- CIB, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 7.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Looking at the price performance of CIB's shares over the past 12 months, there is not much good news to report: the stock is down 47.07%, 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.
- BANCOLOMBIA SA' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, BANCOLOMBIA SA reported lower earnings of $7.07 versus $9.21 in the prior year. For the next year, the market is expecting a contraction of 41.9% in earnings ($4.11 versus $7.07).
- 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 4.4% when compared to the same quarter one year ago, dropping from $258.70 million to $247.24 million.
- You can view the full BanColombia Ratings Report.
- Net operating cash flow has significantly increased by 320.63% to $315.15 million when compared to the same quarter last year. In addition, ONEOK PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -20.76%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 34.5%. Since the same quarter one year prior, revenues fell by 30.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.29, which clearly demonstrates the inability to cover short-term cash needs.
- 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ONEOK PARTNERS -LP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full ONEOK Partners Ratings Report.
- HCP's revenue growth has slightly outpaced the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 12.5%. 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 HCP INC is rather high; currently it is at 54.34%. Regardless of HCP'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 26.61% trails the industry average.
- Net operating cash flow has remained constant at $363.92 million with no significant change when compared to the same quarter last year. Despite stable cash flow, HCP INC's cash flow growth rate is still lower than the industry average growth rate of 15.97%.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, HCP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HCP has underperformed the S&P 500 Index, declining 15.54% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full HCP Ratings Report.
- Our dividend calendar.