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: 4.80% Rayonier (NYSE: RYN) shares currently have a dividend yield of 4.80%. 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 59.03. The average volume for Rayonier has been 693,000 shares per day over the past 30 days. Rayonier has a market cap of $2.6 billion and is part of the materials & construction industry. Shares are down 7.5% 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 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 6.3%. 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 7.99%.
- 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 13.9% in earnings ($0.37 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.
- The revenue growth greatly exceeded the industry average of 36.8%. Since the same quarter one year prior, revenues slightly increased by 7.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WESTERN GAS EQUITY PRTNRS LP has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WESTERN GAS EQUITY PRTNRS LP increased its bottom line by earning $1.07 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus $1.07).
- 41.11% is the gross profit margin for WESTERN GAS EQUITY PRTNRS LP which we consider to be strong. Regardless of WGP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WGP's net profit margin of 22.92% significantly outperformed against the industry.
- WGP'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 52.11%, 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.
- The debt-to-equity ratio is very high at 2.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, WGP's quick ratio is somewhat strong at 1.01, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Western Gas Equity Partners Ratings Report.
- CM's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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 significantly increased by 142.50% to $3,918.00 million when compared to the same quarter last year. In addition, CANADIAN IMPERIAL BANK has also vastly surpassed the industry average cash flow growth rate of -96.40%.
- CANADIAN IMPERIAL BANK' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, CANADIAN IMPERIAL BANK increased its bottom line by earning $8.87 versus $7.85 in the prior year.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CM has underperformed the S&P 500 Index, declining 12.03% from its price level of one year ago. 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.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Commercial Banks industry average, but is greater than that of the S&P 500. The net income has decreased by 4.1% when compared to the same quarter one year ago, dropping from $809.00 million to $776.00 million.
- You can view the full Canadian Imperial Bank of Commerce Ratings Report.
- Our dividend calendar.