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."Rayonier Dividend Yield: 4.40% Rayonier (NYSE: RYN) shares currently have a dividend yield of 4.40%. Rayonier Inc. operates as an investment arm of Rayonier TRS Operating Company. Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company has a P/E ratio of 65.11. The average volume for Rayonier has been 785,200 shares per day over the past 30 days. Rayonier has a market cap of $2.8 billion and is part of the materials & construction industry. Shares are down 18.4% year-to-date as of the close of trading on Thursday. 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 Rayonier as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 44.56% is the gross profit margin for RAYONIER INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RYN's net profit margin of 12.96% significantly trails the industry average.
- Net operating cash flow has slightly increased to $57.52 million or 5.86% when compared to the same quarter last year. Despite an increase in cash flow, RAYONIER INC's average is still marginally south of the industry average growth rate of 9.44%.
- RAYONIER INC's earnings per share declined by 36.0% in the most recent quarter compared to 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, RAYONIER INC reported lower earnings of $0.43 versus $0.80 in the prior year. For the next year, the market is expecting a contraction of 11.6% in earnings ($0.38 versus $0.43).
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 39.9% when compared to the same quarter one year ago, falling from $32.70 million to $19.67 million.
- You can view the full Rayonier Ratings Report.
- Net operating cash flow has increased to $64.09 million or 27.29% when compared to the same quarter last year. In addition, SEMGROUP CORP has also vastly surpassed the industry average cash flow growth rate of -26.85%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 33.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 80.7% when compared to the same quarter one year ago, falling from $25.26 million to $4.87 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 55.08%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 81.35% 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, SEMG is still more expensive than most of the other companies in its industry.
- You can view the full Semgroup Ratings Report.
- The revenue growth came in higher than the industry average of 6.1%. Since the same quarter one year prior, revenues rose by 32.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $36.11 million or 41.14% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 9.44%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.14%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 175.00% 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.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, STAG INDUSTRIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for STAG INDUSTRIAL INC is rather low; currently it is at 16.72%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.72% is significantly below that of the industry average.
- You can view the full Stag Industrial Ratings Report.
- Our dividend calendar.