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."Copa Holdings Dividend Yield: 8.30% Copa Holdings (NYSE: CPA) shares currently have a dividend yield of 8.30%. Copa Holdings, S.A. provides airline passenger and cargo services in Latin America. It offers services within Colombia; and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala, and Costa Rica. The company has a P/E ratio of 5.54. The average volume for Copa Holdings has been 744,500 shares per day over the past 30 days. Copa Holdings has a market cap of $1.3 billion and is part of the transportation industry. Shares are down 61% 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 Copa Holdings as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. 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:
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
- CPA, with its decline in revenue, underperformed when compared the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 20.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Airlines industry and the overall market, COPA HOLDINGS SA'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 COPA HOLDINGS SA is rather low; currently it is at 15.42%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 11.90% trails that of the industry average.
- You can view the full Copa Holdings 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 16.13%.
- 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 Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 24.7% when compared to the same quarter one year ago, dropping from $218.89 million to $164.89 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 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.
- You can view the full HCP Ratings Report.
- TIME 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TIME INC increased its bottom line by earning $0.80 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($1.23 versus $0.80).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 175.0% when compared to the same quarter one year prior, rising from -$32.00 million to $24.00 million.
- The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.
- TIME has underperformed the S&P 500 Index, declining 20.25% 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 decreased to $63.00 million or 21.25% 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 Time Ratings Report.
- Our dividend calendar.