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: 4.10% BanColombia (NYSE: CIB) shares currently have a dividend yield of 4.10%. 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 336,300 shares per day over the past 30 days. BanColombia has a market cap of $8.2 billion and is part of the banking industry. Shares are down 29.4% 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 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.
- 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. Despite an increase in cash flow, GOVERNMENT PPTYS INCOME TR's average is still marginally south of the industry average growth rate of 16.11%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.02%, 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.
- The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 26.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TWO HARBORS INVESTMENT CORP reported significant earnings per share improvement 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, TWO HARBORS INVESTMENT CORP reported lower earnings of $0.46 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus $0.46).
- TWO has underperformed the S&P 500 Index, declining 7.42% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has significantly decreased to -$526.50 million or 159.28% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Two Harbors Investment Ratings Report.
- Our dividend calendar.