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."Government Properties Income Dividend Yield: 11.10% Government Properties Income (NYSE: GOV) shares currently have a dividend yield of 11.10%. Government Properties Income Trust is an equity real estate investment trust launched and managed by Reit Management & Research LLC. The trust invests in the real estate markets of United States. It engages in investment, operation and maintenance of real estate assets. The average volume for Government Properties Income has been 950,600 shares per day over the past 30 days. Government Properties Income has a market cap of $1.1 billion and is part of the real estate industry. Shares are down 31.8% 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 Government Properties Income as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. 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:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 9.0%. 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 increased to $34.61 million or 16.07% when compared to the same quarter last year. In addition, GOVERNMENT PPTYS INCOME TR has also modestly surpassed the industry average cash flow growth rate of 15.97%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 34.44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1142.30% compared to 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 when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 1408.6% when compared to the same quarter one year ago, falling from $14.61 million to -$191.16 million.
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GOVERNMENT PPTYS INCOME TR's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Government Properties Income Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 3.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- RETAIL PPTYS OF AMERICA INC reported flat earnings per share in the most recent quarter. 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, RETAIL PPTYS OF AMERICA INC turned its bottom line around by earning $0.15 versus -$0.20 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus $0.15).
- Net operating cash flow has slightly increased to $71.86 million or 3.34% when compared to the same quarter last year. Despite an increase in cash flow, RETAIL PPTYS OF AMERICA INC's cash flow growth rate is still lower than the industry average growth rate of 15.97%.
- The gross profit margin for RETAIL PPTYS OF AMERICA INC is rather low; currently it is at 24.54%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 20.33% significantly trails the industry average.
- RPAI has underperformed the S&P 500 Index, declining 15.31% 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 Retail Properties of America Ratings Report.
- Net operating cash flow has increased to $99.90 million or 29.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.81%.
- GEF, with its decline in revenue, underperformed when compared the industry average of 1.9%. Since the same quarter one year prior, revenues fell by 17.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Containers & Packaging industry and the overall market, GREIF INC'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 GREIF INC is rather low; currently it is at 22.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.92% trails that of the industry average.
- You can view the full Greif Ratings Report.
- Our dividend calendar.