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: 12.90% Quad/Graphics (NYSE: QUAD) shares currently have a dividend yield of 12.90%. 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 319,000 shares per day over the past 30 days. Quad/Graphics has a market cap of $330.4 million and is part of the diversified services industry. Shares are down 58.4% 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 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 22.2% in earnings ($0.28 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.
- CNNX's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for CONE MIDSTREAM PARTNERS LP is rather high; currently it is at 69.84%. It has increased significantly from the same period last year. Along with this, the net profit margin of 36.57% significantly outperformed against the industry average.
- Net operating cash flow has improved to $38.81 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
- This stock's share value has moved by only 58.41% over the past year.
- CONE MIDSTREAM PARTNERS LP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. This year, the market expects an improvement in earnings ($1.13 versus $0.26).
- You can view the full CONE Midstream Partners Ratings Report.
- 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 219.8% when compared to the same quarter one year ago, falling from $30.87 million to -$36.98 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 Real Estate Investment Trusts (REITs) industry and the overall market, DYNEX CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of DYNEX CAPITAL INC has not done very well: it is down 19.16% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- DYNEX CAPITAL 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. 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, DYNEX CAPITAL INC reported lower earnings of $0.34 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus $0.34).
- The revenue fell significantly faster than the industry average of 6.1%. Since the same quarter one year prior, revenues fell by 27.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Dynex Capital Ratings Report.
- Our dividend calendar.