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 "Sell."CYS Investments Dividend Yield: 14.00% CYS Investments (NYSE: CYS) shares currently have a dividend yield of 14.00%. CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The company has a P/E ratio of 16.84. The average volume for CYS Investments has been 1,655,000 shares per day over the past 30 days. CYS Investments has a market cap of $1.2 billion and is part of the real estate industry. Shares are down 12.5% 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 CYS Investments as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 161.3% when compared to the same quarter one year ago, falling from $158.38 million to -$97.04 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC's return on equity is below that of both the industry average and the S&P 500.
- The share price of CYS INVESTMENTS INC has not done very well: it is down 13.05% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- CYS INVESTMENTS INC 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CYS INVESTMENTS INC turned its bottom line around by earning $2.51 versus -$2.87 in the prior year. For the next year, the market is expecting a contraction of 54.6% in earnings ($1.14 versus $2.51).
- The gross profit margin for CYS INVESTMENTS INC is currently very high, coming in at 92.55%. 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 -120.31% is in-line with the industry average.
- You can view the full CYS Investments Ratings Report.
- 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 Energy Equipment & Services industry and the overall market, ENSCO PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $427.80 million or 15.25% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ENSCO PLC has marginally lower results.
- ESV'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 65.84%, 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.
- Despite the weak revenue results, ESV has outperformed against the industry average of 22.6%. Since the same quarter one year prior, revenues slightly dropped by 6.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- ENSCO PLC 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, ENSCO PLC swung to a loss, reporting -$11.70 versus $6.08 in the prior year. This year, the market expects an improvement in earnings ($4.10 versus -$11.70).
- You can view the full Ensco Ratings Report.
- 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 Commercial Banks industry average. The net income has decreased by 22.0% when compared to the same quarter one year ago, dropping from $2,301.00 million to $1,795.00 million.
- Looking at the price performance of BNS's shares over the past 12 months, there is not much good news to report: the stock is down 28.52%, 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.
- 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 on the basis of return on equity, BANK OF NOVA SCOTIA has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- BANK OF NOVA SCOTIA's earnings per share declined by 21.6% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BANK OF NOVA SCOTIA increased its bottom line by earning $5.66 versus $1.29 in the prior year.
- Net operating cash flow has significantly increased by 289.65% to $17,786.00 million when compared to the same quarter last year. Despite an increase in cash flow of 289.65%, BANK OF NOVA SCOTIA is still growing at a significantly lower rate than the industry average of 2845.02%.
- You can view the full Bank of Nova Scotia Ratings Report.
- Our dividend calendar.