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."Acacia Research Corporation Dividend Yield: 8.40% Acacia Research Corporation (NASDAQ: ACTG) shares currently have a dividend yield of 8.40%. Acacia Research Corporation, through its subsidiaries, invests in, develops, licenses, and enforces patented technologies in the United States. The average volume for Acacia Research Corporation has been 516,500 shares per day over the past 30 days. Acacia Research Corporation has a market cap of $303.4 million and is part of the diversified services industry. Shares are down 66.7% year-to-date as of the close of trading on Monday. 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 Acacia Research Corporation as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, 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 Professional Services industry. The net income has significantly decreased by 120.0% when compared to the same quarter one year ago, falling from -$12.42 million to -$27.31 million.
- Net operating cash flow has decreased to $8.60 million or 40.80% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.72%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 111.53% compared to the year-earlier 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.
- ACACIA RESEARCH CORP 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, ACACIA RESEARCH CORP reported poor results of -$1.38 versus -$1.18 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus -$1.38).
- 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 Professional Services industry and the overall market, ACACIA RESEARCH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Acacia Research Corporation Ratings Report.
- NORDIC AMERICAN OFFSHORE 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. For the next year, the market is expecting a contraction of 196.8% in earnings (-$0.30 versus $0.31).
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 209.8% when compared to the same quarter one year ago, falling from $2.83 million to -$3.10 million.
- The gross profit margin for NORDIC AMERICAN OFFSHORE is rather low; currently it is at 23.95%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -38.98% is significantly below that of the industry average.
- Net operating cash flow has decreased to $4.35 million or 21.08% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, NORDIC AMERICAN OFFSHORE has marginally lower results.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.42%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 208.33% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full Nordic American Offshore Ratings Report.
- CCUR'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 31.63%, 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.
- 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. In comparison to the other companies in the Computers & Peripherals industry and the overall market, CONCURRENT COMPUTER CP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- CONCURRENT COMPUTER CP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, CONCURRENT COMPUTER CP swung to a loss, reporting -$0.03 versus $2.04 in the prior year.
- The revenue fell significantly faster than the industry average of 25.6%. Since the same quarter one year prior, revenues fell by 23.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- CCUR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.68, which clearly demonstrates the ability to cover short-term cash needs.
- You can view the full Concurrent Computer Ratings Report.
- Our dividend calendar.