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."ConocoPhillips Dividend Yield: 5.40% ConocoPhillips (NYSE: COP) shares currently have a dividend yield of 5.40%. ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. The company has a P/E ratio of 41.46. The average volume for ConocoPhillips has been 11,027,900 shares per day over the past 30 days. ConocoPhillips has a market cap of $68.0 billion and is part of the energy industry. Shares are down 20% year-to-date as of the close of trading on Wednesday. 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 ConocoPhillips as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income. Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.51, 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 1.03, which illustrates the ability to avoid short-term cash problems.
- 36.86% is the gross profit margin for CONOCOPHILLIPS which we consider to be strong. Regardless of COP'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 -2.15% trails the industry average.
- COP, with its decline in revenue, slightly underperformed the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 40.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CONOCOPHILLIPS 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. 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, CONOCOPHILLIPS reported lower earnings of $4.61 versus $6.43 in the prior year. For the next year, the market is expecting a contraction of 109.5% in earnings (-$0.44 versus $4.61).
- 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 108.6% when compared to the same quarter one year ago, falling from $2,081.00 million to -$179.00 million.
- You can view the full ConocoPhillips Ratings Report.
- RGC's revenue growth has slightly outpaced the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 12.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 58.0% when compared to the same quarter one year prior, rising from $33.80 million to $53.40 million.
- REGAL ENTERTAINMENT GROUP 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, REGAL ENTERTAINMENT GROUP reported lower earnings of $0.68 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus $0.68).
- After a year of stock price fluctuations, the net result is that RGC'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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for REGAL ENTERTAINMENT GROUP is rather low; currently it is at 22.30%. Regardless of RGC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.18% trails the industry average.
- You can view the full Regal Entertainment Group Ratings Report.
- Net operating cash flow has significantly increased by 1069.36% to $8.64 million when compared to the same quarter last year. In addition, GENESIS ENERGY -LP has also vastly surpassed the industry average cash flow growth rate of -19.65%.
- GENESIS ENERGY -LP'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, GENESIS ENERGY -LP increased its bottom line by earning $1.19 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $1.19).
- GEL, with its decline in revenue, slightly underperformed the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 35.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GENESIS ENERGY -LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The share price of GENESIS ENERGY -LP has not done very well: it is down 23.10% 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. 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.
- You can view the full Genesis Energy Ratings Report.
- Our dividend calendar.