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."Select Income REIT Dividend Yield: 10.00% Select Income REIT (NYSE: SIR) shares currently have a dividend yield of 10.00%. Select Income REIT, a real estate investment trust (REIT), primarily owns and invests in single tenant and net leased properties. The company has a P/E ratio of 16.36. The average volume for Select Income REIT has been 591,800 shares per day over the past 30 days. Select Income REIT has a market cap of $1.8 billion and is part of the real estate industry. Shares are down 19.1% 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 Select Income REIT as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and good cash flow from operations. 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:
- SIR's very impressive revenue growth greatly exceeded the industry average of 9.8%. Since the same quarter one year prior, revenues leaped by 89.2%. 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 SELECT INCOME REIT is rather high; currently it is at 52.25%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 27.17% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $30.21 million to $29.14 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Select Income REIT Ratings Report.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 4.1% when compared to the same quarter one year prior, going from $2,352.00 million to $2,449.00 million.
- The gross profit margin for ROYAL BANK OF CANADA is currently very high, coming in at 79.71%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.73% is above that of the industry average.
- Net operating cash flow has significantly increased by 270.93% to $17,408.00 million when compared to the same quarter last year. Despite an increase in cash flow of 270.93%, ROYAL BANK OF CANADA is still growing at a significantly lower rate than the industry average of 3018.12%.
- 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, ROYAL BANK OF CANADA's return on equity exceeds that of both the industry average and the S&P 500.
- RY has underperformed the S&P 500 Index, declining 21.62% 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.
- You can view the full Royal Bank Of Canada Ratings Report.
- 48.89% is the gross profit margin for LEXMARK INTL INC which we consider to be strong. 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 -4.06% is in-line with the industry average.
- The revenue fell significantly faster than the industry average of 37.3%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- LEXMARK INTL 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. 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, LEXMARK INTL INC reported lower earnings of $1.23 versus $4.10 in the prior year. This year, the market expects an improvement in earnings ($3.57 versus $1.23).
- 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 Computers & Peripherals industry and the overall market, LEXMARK INTL INC'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 Computers & Peripherals industry. The net income has significantly decreased by 196.5% when compared to the same quarter one year ago, falling from $37.50 million to -$36.20 million.
- You can view the full Lexmark International Ratings Report.
- Our dividend calendar.