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."City Office REIT Dividend Yield: 8.50% City Office REIT (NYSE: CIO) shares currently have a dividend yield of 8.50%. City Office REIT, Inc is an equity real estate investment trust. The fund invests in the real estate markets of the United States. It acquires, own and operate high-quality office properties. City Office REIT, Inc was formed in November 26, 2013 and is domiciled in the United States. The average volume for City Office REIT has been 45,800 shares per day over the past 30 days. City Office REIT has a market cap of $138.1 million and is part of the real estate industry. Shares are down 13.3% 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 City Office REIT as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for CITY OFFICE REIT INC is rather low; currently it is at 17.94%. Regardless of CIO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CIO's net profit margin of -15.44% significantly underperformed when compared to the industry average.
- CIO has underperformed the S&P 500 Index, declining 17.13% 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.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CITY OFFICE REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 62.43% to $2.91 million when compared to the same quarter last year. In addition, CITY OFFICE REIT INC has also vastly surpassed the industry average cash flow growth rate of 6.55%.
- CITY OFFICE REIT INC has improved earnings per share by 37.5% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings (-$0.28 versus -$0.60).
- You can view the full City Office REIT Ratings Report.
- OCIP'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 56.05%, 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.
- OCI PARTNERS LP has improved earnings per share by 17.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, OCI PARTNERS LP increased its bottom line by earning $1.48 versus $0.91 in the prior year. For the next year, the market is expecting a contraction of 60.8% in earnings ($0.58 versus $1.48).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 24.2% when compared to the same quarter one year prior, going from $18.60 million to $23.10 million.
- The revenue growth greatly exceeded the industry average of 19.3%. Since the same quarter one year prior, revenues rose by 14.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- You can view the full OCI Partners Ratings Report.
- STB'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 35.90%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, STB is still more expensive than most of the other companies in its industry.
- The gross profit margin for STUDENT TRANSPORTATION INC is currently extremely low, coming in at 8.03%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -10.21% is significantly below that of the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Road & Rail industry average. The net income has decreased by 9.0% when compared to the same quarter one year ago, dropping from -$8.76 million to -$9.54 million.
- STUDENT TRANSPORTATION INC has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. Stable Earnings per share over the past year indicate the company has sound management over its earnings and share float. During the past fiscal year, STUDENT TRANSPORTATION INC's EPS of $0.02 remained unchanged from the prior years' EPS of $0.02.
- The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- You can view the full Student Transportation Ratings Report.
- Our dividend calendar.