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."Retail Properties of America Dividend Yield: 4.70% Retail Properties of America (NYSE: RPAI) shares currently have a dividend yield of 4.70%. Retail Properties of America, Inc. is a real estate investment trust. It engages in acquisition, development and management of properties. The trust invests in the real estate markets of United States. The company has a P/E ratio of 108.38. The average volume for Retail Properties of America has been 898,100 shares per day over the past 30 days. Retail Properties of America has a market cap of $3.3 billion and is part of the real estate industry. Shares are down 15.3% 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 Retail Properties of America as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. 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 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 16.13%.
- After a year of stock price fluctuations, the net result is that RPAI's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
- 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.
- You can view the full Retail Properties of America Ratings Report.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Independent Power Producers & Energy Traders industry and the overall market, AES CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- AES CORP's earnings per share declined by 50.0% 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, AES CORP increased its bottom line by earning $1.09 versus $0.37 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $1.09).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.8%. Since the same quarter one year prior, revenues fell by 10.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The debt-to-equity ratio is very high at 5.37 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, AES maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.
- 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 48.1% when compared to the same quarter one year ago, falling from $133.00 million to $69.00 million.
- You can view the full AES Corporation Ratings Report.
- The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.00, which illustrates the ability to avoid short-term cash problems.
- BP, with its decline in revenue, slightly underperformed the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 35.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- BP PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BP PLC reported lower earnings of $1.21 versus $7.34 in the prior year. This year, the market expects an improvement in earnings ($1.92 versus $1.21).
- 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 Oil, Gas & Consumable Fuels industry and the overall market, BP PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 272.8% when compared to the same quarter one year ago, falling from $3,369.00 million to -$5,823.00 million.
- You can view the full BP Ratings Report.
- Our dividend calendar.