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."CenturyLink Dividend Yield: 7.70% CenturyLink (NYSE: CTL) shares currently have a dividend yield of 7.70%. CenturyLink, Inc. provides various communications services to residential, business, governmental, and wholesale customers in the United States. It operates through two segments, Business and Consumer. The company has a P/E ratio of 21.47. The average volume for CenturyLink has been 5,138,000 shares per day over the past 30 days. CenturyLink has a market cap of $15.4 billion and is part of the telecommunications industry. Shares are down 28% 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 CenturyLink as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk. Highlights from the ratings report include:
- CENTURYLINK INC has improved earnings per share by 12.1% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CENTURYLINK INC turned its bottom line around by earning $1.35 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($2.56 versus $1.35).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Diversified Telecommunication Services industry average. The net income increased by 9.0% when compared to the same quarter one year prior, going from $188.00 million to $205.00 million.
- Net operating cash flow has slightly increased to $1,475.00 million or 3.29% when compared to the same quarter last year. Despite an increase in cash flow, CENTURYLINK INC's average is still marginally south of the industry average growth rate of 11.31%.
- CTL'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 30.87%, 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. 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.
- Even though the current debt-to-equity ratio is 1.43, 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 0.42 is very low and demonstrates very weak liquidity.
- You can view the full CenturyLink Ratings Report.
- The revenue fell significantly faster than the industry average of 5.9%. Since the same quarter one year prior, revenues fell by 45.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for GREENHILL & CO INC is currently extremely low, coming in at 5.34%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 1.35% significantly trails the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.14%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 96.96% compared to the year-earlier 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, GHL is still more expensive than most of the other companies in its industry.
- GREENHILL & CO 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, GREENHILL & CO INC reported lower earnings of $1.45 versus $1.56 in the prior year. For the next year, the market is expecting a contraction of 45.5% in earnings ($0.79 versus $1.45).
- 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 Capital Markets industry. The net income has significantly decreased by 96.5% when compared to the same quarter one year ago, falling from $19.87 million to $0.68 million.
- You can view the full Greenhill Ratings Report.
- The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that POT's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
- 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 Chemicals industry and the overall market on the basis of return on equity, POTASH CORP SASK INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 39.11% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 18.44% compares favorably to the industry average.
- POTASH CORP SASK INC's earnings per share declined by 10.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, POTASH CORP SASK INC reported lower earnings of $1.83 versus $2.03 in the prior year. For the next year, the market is expecting a contraction of 12.6% in earnings ($1.60 versus $1.83).
- Net operating cash flow has decreased to $358.00 million or 37.63% 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.
- You can view the full Potash Corp of Saskatchewan Ratings Report.
- Our dividend calendar.