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."Education Realty Dividend Yield: 4.70% Education Realty (NYSE: EDR) shares currently have a dividend yield of 4.70%. EdR is a real estate investment trust. The firm invests in the real estate markets of United States. It invests collegiate housing communities. The firm develops, acquires, owns, and manages collegiate housing communities located near university campuses. The company has a P/E ratio of 26.08. The average volume for Education Realty has been 330,300 shares per day over the past 30 days. Education Realty has a market cap of $1.5 billion and is part of the real estate industry. Shares are down 11.8% 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 Education Realty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- EDR's revenue growth has slightly outpaced the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 14.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- EDUCATION REALTY TRUST INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EDUCATION REALTY TRUST INC increased its bottom line by earning $0.98 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 66.3% in earnings ($0.33 versus $0.98).
- The gross profit margin for EDUCATION REALTY TRUST INC is rather low; currently it is at 15.40%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, EDR's net profit margin of 5.10% is significantly lower than the industry average.
- Net operating cash flow has decreased to $16.82 million or 13.66% 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.
- You can view the full Education Realty Ratings Report.
- The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, STM has a quick ratio of 1.55, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 218.57% to $223.00 million when compared to the same quarter last year. In addition, STMICROELECTRONICS NV has also vastly surpassed the industry average cash flow growth rate of -22.76%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.5%. Since the same quarter one year prior, revenues slightly dropped by 5.6%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Semiconductors & Semiconductor Equipment industry average. The net income has decreased by 10.5% when compared to the same quarter one year ago, dropping from $38.00 million to $34.00 million.
- STM has underperformed the S&P 500 Index, declining 10.69% 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 STMicroelectronics Ratings Report.
- CM's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 2.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for CANADIAN IMPERIAL BANK is currently very high, coming in at 78.89%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.40% is above that of the industry average.
- 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 25.18%, 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.
- Our dividend calendar.