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." Icahn Dividend Yield: 11.20% Icahn (NASDAQ: IEP) shares currently have a dividend yield of 11.20%. Icahn Enterprises L.P., through its subsidiaries, operates in investment, automotive, energy, metals, railcar, gaming, food packaging, real estate, and home fashion businesses in the United States, Germany, and Internationally. Its Investment segment operates various private investment funds. The average volume for Icahn has been 123,400 shares per day over the past 30 days. Icahn has a market cap of $6.9 billion and is part of the conglomerates industry. Shares are down 16.1% 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 Icahn as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Industrial Conglomerates industry average. The net income has decreased by 23.7% when compared to the same quarter one year ago, dropping from -$355.00 million to -$439.00 million.
- The debt-to-equity ratio is very high at 2.60 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- 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 Industrial Conglomerates industry and the overall market, ICAHN ENTERPRISES LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ICAHN ENTERPRISES LP is currently extremely low, coming in at 0.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -13.82% is significantly below that of the industry average.
- Looking at the price performance of IEP's shares over the past 12 months, there is not much good news to report: the stock is down 46.23%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- You can view the full Icahn Ratings Report.
- The change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has significantly decreased by 28.0% when compared to the same quarter one year ago, falling from $0.38 million to $0.27 million.
- MDLY, with its decline in revenue, underperformed when compared the industry average of 0.3%. Since the same quarter one year prior, revenues fell by 23.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- MEDLEY MANAGEMENT INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($0.66 versus $0.24).
- Looking at the price performance of MDLY's shares over the past 12 months, there is not much good news to report: the stock is down 38.46%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter.
- The gross profit margin for MEDLEY MANAGEMENT INC is currently very high, coming in at 73.49%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MDLY's net profit margin of 1.72% significantly trails the industry average.
- You can view the full Medley Management 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 Marine industry. The net income has significantly decreased by 700.1% when compared to the same quarter one year ago, falling from $6.72 million to -$40.32 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 Marine industry and the overall market, GLOBAL SHIP LEASE INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.24 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, GSL has managed to keep a strong quick ratio of 1.58, which demonstrates the ability to cover short-term cash needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 64.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 761.53% 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.
- GLOBAL SHIP LEASE 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, GLOBAL SHIP LEASE INC reported lower earnings of $0.10 versus $0.68 in the prior year. This year, the market expects an improvement in earnings ($0.22 versus $0.10).
- You can view the full Global Ship Lease Ratings Report.
- Our dividend calendar.