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: 13.30% CYS Investments (NYSE: CYS) shares currently have a dividend yield of 13.30%. 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 17.82. The average volume for CYS Investments has been 1,631,800 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 9.3% 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 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 10.84% 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.
- HSC'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 48.50%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- The debt-to-equity ratio is very high at 3.55 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, HSC maintains a poor quick ratio of 0.76, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for HARSCO CORP is currently lower than what is desirable, coming in at 29.49%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.44% trails that of the industry average.
- Net operating cash flow has decreased to $34.75 million or 25.95% 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.
- 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. Compared to other companies in the Machinery industry and the overall market, HARSCO CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Harsco Ratings Report.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.92%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 400.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- 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 Metals & Mining industry. The net income has significantly decreased by 310.0% when compared to the same quarter one year ago, falling from -$4.00 million to -$16.40 million.
- The gross profit margin for ALLEGHENY TECHNOLOGIES INC is currently extremely low, coming in at 12.22%. Regardless of ATI's low profit margin, it has managed to increase from the same period last year.
- ALLEGHENY TECHNOLOGIES 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, ALLEGHENY TECHNOLOGIES INC continued to lose money by earning -$0.02 versus -$0.93 in the prior year. For the next year, the market is expecting a contraction of 1850.0% in earnings (-$0.39 versus -$0.02).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, ALLEGHENY TECHNOLOGIES INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Allegheny Technologies Ratings Report.
- Our dividend calendar.