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."Garmin Dividend Yield: 5.50% Garmin (NASDAQ: GRMN) shares currently have a dividend yield of 5.50%. Garmin Ltd., together with its subsidiaries, designs, develops, manufactures, and markets hand-held, wrist-based, and portable and fixed-mount global positioning system (GPS) enabled products; and other navigation, communication, and information products worldwide. The company has a P/E ratio of 13.25. The average volume for Garmin has been 1,560,300 shares per day over the past 30 days. Garmin has a market cap of $7.0 billion and is part of the electronics industry. Shares are down 29.5% year-to-date as of the close of trading on Tuesday. 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 Garmin as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 181.2% when compared to the same quarter one year prior, rising from -$146.83 million to $119.30 million.
- GRMN 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. To add to this, GRMN has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Household Durables industry and the overall market on the basis of return on equity, GARMIN LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- GRMN'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 30.89%, 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.
- Net operating cash flow has declined marginally to $137.84 million or 3.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Garmin Ratings Report.
- Net operating cash flow has significantly increased by 76.19% to $185.00 million when compared to the same quarter last year. In addition, SUNOCO LOGISTICS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -26.85%.
- Along with the very weak revenue results, SXL underperformed when compared to the industry average of 36.8%. Since the same quarter one year prior, revenues plummeted by 51.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.88%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 114.00% 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SUNOCO LOGISTICS PARTNERS LP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Sunoco Logistics Partners Ratings Report.
- The gross profit margin for APOLLO INVESTMENT CORP is currently very high, coming in at 72.47%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.77% is in-line with the industry average.
- Net operating cash flow has significantly increased by 145.34% to $83.12 million when compared to the same quarter last year. Despite an increase in cash flow of 145.34%, APOLLO INVESTMENT CORP is still growing at a significantly lower rate than the industry average of 272.65%.
- AINV, with its decline in revenue, underperformed when compared the industry average of 5.7%. Since the same quarter one year prior, revenues fell by 17.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 104.2% when compared to the same quarter one year ago, falling from $41.97 million to -$1.75 million.
- 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 Capital Markets industry and the overall market, APOLLO INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Apollo Investment Ratings Report.
- Our dividend calendar.