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."CenturyLink Dividend Yield: 8.10% CenturyLink (NYSE: CTL) shares currently have a dividend yield of 8.10%. CenturyLink, Inc. provides various communications services to residential, business, governmental, and wholesale customers in the United States. It operates through two segments, Business and Consumer. The company has a P/E ratio of 20.26. The average volume for CenturyLink has been 5,050,400 shares per day over the past 30 days. CenturyLink has a market cap of $14.6 billion and is part of the telecommunications industry. Shares are up 5.8% year-to-date as of the close of trading on Friday. 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 CenturyLink as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk. Highlights from the ratings report include:
- CENTURYLINK INC has improved earnings per share by 12.1% 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, CENTURYLINK INC turned its bottom line around by earning $1.35 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $1.35).
- CTL's revenue growth trails the industry average of 14.2%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $1,475.00 million or 3.29% when compared to the same quarter last year. Despite an increase in cash flow, CENTURYLINK INC's cash flow growth rate is still lower than the industry average growth rate of 41.86%.
- Even though the current debt-to-equity ratio is 1.43, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
- CTL'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 32.66%, 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. 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, CTL is still more expensive than most of the other companies in its industry.
- You can view the full CenturyLink Ratings Report.
- The revenue growth greatly exceeded the industry average of 31.6%. Since the same quarter one year prior, revenues rose by 33.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SHIP FINANCE INTL LTD has improved earnings per share by 26.5% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SHIP FINANCE INTL LTD increased its bottom line by earning $1.25 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($2.36 versus $1.25).
- SFL has underperformed the S&P 500 Index, declining 12.63% 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 debt-to-equity ratio of 1.50 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, SFL maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
- You can view the full Ship Finance International Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 3.1%. 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.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PIEDMONT OFFICE REALTY TRUST's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- PIEDMONT OFFICE REALTY TRUST 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, PIEDMONT OFFICE REALTY TRUST reported lower earnings of $0.27 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.27).
- 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 120.5% when compared to the same quarter one year ago, falling from $9.16 million to -$1.88 million.
- The gross profit margin for PIEDMONT OFFICE REALTY TRUST is currently extremely low, coming in at 5.37%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -1.25% is significantly below that of the industry average.
- You can view the full Piedmont Office Realty Ratings Report.
- Our dividend calendar.