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."Quad/Graphics Dividend Yield: 9.20% Quad/Graphics (NYSE: QUAD) shares currently have a dividend yield of 9.20%. Quad/Graphics, Inc., together with its subsidiaries, provides print and media solutions in the United States, Europe, and Latin America. The average volume for Quad/Graphics has been 234,500 shares per day over the past 30 days. Quad/Graphics has a market cap of $463.5 million and is part of the diversified services industry. Shares are down 43.8% year-to-date as of the close of trading on Friday. 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 Quad/Graphics as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has increased to $59.20 million or 28.97% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.53%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.0%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- QUAD/GRAPHICS 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, QUAD/GRAPHICS INC reported lower earnings of $0.36 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($1.06 versus $0.36).
- The debt-to-equity ratio of 1.44 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, QUAD maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.
- 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. Compared to other companies in the Commercial Services & Supplies industry and the overall market, QUAD/GRAPHICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Quad/Graphics Ratings Report.
- The revenue growth greatly exceeded the industry average of 20.3%. Since the same quarter one year prior, revenues rose by 14.5%. 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 Marine industry. The net income increased by 306.7% when compared to the same quarter one year prior, rising from $20.00 million to $81.36 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Marine industry and the overall market on the basis of return on equity, SEASPAN CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- SSW has underperformed the S&P 500 Index, declining 21.87% 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.
- The debt-to-equity ratio is very high at 2.06 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SSW's quick ratio is somewhat strong at 1.19, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Seaspan Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $20.29 million to $20.45 million.
- Net operating cash flow has significantly increased by 176.55% to $296.65 million when compared to the same quarter last year. In addition, FIFTH STREET FINANCE CORP has also vastly surpassed the industry average cash flow growth rate of 79.46%.
- The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 66.50%. Regardless of FSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSC's net profit margin of 29.13% significantly outperformed against the industry.
- Looking at the price performance of FSC's shares over the past 12 months, there is not much good news to report: the stock is down 35.53%, 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. 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.
- 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 Capital Markets industry and the overall market, FIFTH STREET FINANCE CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Fifth Street Finance Corporation Ratings Report.
- Our dividend calendar.