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."HCP Dividend Yield: 5.80% HCP (NYSE: HCP) shares currently have a dividend yield of 5.80%. HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. The company has a P/E ratio of 49.61. The average volume for HCP has been 3,561,900 shares per day over the past 30 days. HCP has a market cap of $18.1 billion and is part of the real estate industry. Shares are down 10.5% 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 HCP as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- HCP's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 12.5%. 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 HCP INC is rather high; currently it is at 58.08%. Regardless of HCP'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 26.61% trails the industry average.
- Net operating cash flow has remained constant at $363.92 million with no significant change when compared to the same quarter last year. Despite stable cash flow, HCP INC's cash flow growth rate is still lower than the industry average growth rate of 16.24%.
- 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, HCP INC's return on equity is below that of both the industry average and the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HCP has underperformed the S&P 500 Index, declining 9.83% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full HCP Ratings Report.
- The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 19.2%. 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.
- Net operating cash flow has increased to $367.00 million or 11.80% when compared to the same quarter last year. In addition, FRONTIER COMMUNICATIONS CORP has also modestly surpassed the industry average cash flow growth rate of 3.60%.
- Despite the current debt-to-equity ratio of 1.58, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.58 is very high and demonstrates very strong liquidity.
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 174.3% when compared to the same quarter one year ago, falling from $37.68 million to -$28.00 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. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Frontier Communications Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 89.4% when compared to the same quarter one year prior, rising from -$24.23 million to -$2.56 million.
- Despite the weak revenue results, GLNG has significantly outperformed against the industry average of 34.5%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- GLNG's debt-to-equity ratio of 0.83 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
- GLNG'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 31.40%, 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.
- Net operating cash flow has significantly decreased to -$15.22 million or 120.73% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Golar LNG Ratings Report.
- Our dividend calendar.