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."Quad/Graphics Dividend Yield: 13.60% Quad/Graphics (NYSE: QUAD) shares currently have a dividend yield of 13.60%. 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 277,300 shares per day over the past 30 days. Quad/Graphics has a market cap of $313.4 million and is part of the diversified services industry. Shares are down 59.7% 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 Quad/Graphics as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 3.37 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, QUAD maintains a poor quick ratio of 0.85, which illustrates the inability to avoid short-term cash problems.
- 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. 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.
- The gross profit margin for QUAD/GRAPHICS INC is rather low; currently it is at 19.52%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -47.76% is significantly below that of the industry average.
- 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. 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, QUAD/GRAPHICS INC reported lower earnings of $0.36 versus $0.60 in the prior year. For the next year, the market is expecting a contraction of 19.4% in earnings ($0.29 versus $0.36).
- 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 Commercial Services & Supplies industry. The net income has significantly decreased by 2363.1% when compared to the same quarter one year ago, falling from $24.40 million to -$552.20 million.
- You can view the full Quad/Graphics Ratings Report.
- TRANSOCEAN PARTNERS LLC 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 6.0% in earnings ($1.18 versus $1.25).
- 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 443.6% when compared to the same quarter one year ago, falling from $39.00 million to -$134.00 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 47.08%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 876.00% 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.
- 41.60% is the gross profit margin for TRANSOCEAN PARTNERS LLC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, RIGP's net profit margin of -107.20% significantly underperformed when compared to the industry average.
- Despite the weak revenue results, RIGP has outperformed against the industry average of 30.8%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Transocean Partners Ratings Report.
- The gross profit margin for NAVIOS MARITIME HOLDINGS INC is rather low; currently it is at 21.89%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -20.70% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $2.10 million or 80.85% when compared to the same quarter last year. Despite a decrease in cash flow of 80.85%, NAVIOS MARITIME HOLDINGS INC is in line with the industry average cash flow growth rate of -83.99%.
- NM'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 67.31%, 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.
- The debt-to-equity ratio of 1.48 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, NM has managed to keep a strong quick ratio of 1.54, which demonstrates the ability to cover 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 Marine industry and the overall market, NAVIOS MARITIME HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Navios Maritime Holdings Ratings Report.
- Our dividend calendar.