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."Macquarie Infrastructure Dividend Yield: 7.60% Macquarie Infrastructure (NYSE: MIC) shares currently have a dividend yield of 7.60%. Macquarie Infrastructure Company LLC, through its subsidiaries, owns, operates, and invests in infrastructure businesses that provide services to businesses and individuals primarily in the United States. The average volume for Macquarie Infrastructure has been 936,300 shares per day over the past 30 days. Macquarie Infrastructure has a market cap of $4.9 billion and is part of the transportation industry. Shares are down 17.1% year-to-date as of the close of trading on Wednesday. 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 Macquarie Infrastructure as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and generally higher debt management risk. 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 Transportation Infrastructure industry. The net income increased by 57.0% when compared to the same quarter one year prior, rising from $20.97 million to $32.92 million.
- Net operating cash flow has significantly increased by 120.49% to $126.24 million when compared to the same quarter last year. In addition, MACQUARIE INFRASTRUCTURE CP has also vastly surpassed the industry average cash flow growth rate of 11.57%.
- MACQUARIE INFRASTRUCTURE CP has improved earnings per share by 36.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MACQUARIE INFRASTRUCTURE CP swung to a loss, reporting -$1.48 versus $14.70 in the prior year. This year, the market expects an improvement in earnings (-$1.43 versus -$1.48).
- MIC has underperformed the S&P 500 Index, declining 21.52% 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.
- 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 Transportation Infrastructure industry and the overall market, MACQUARIE INFRASTRUCTURE CP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Macquarie Infrastructure Ratings Report.
- HBHC's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 2.6%. 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 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 Commercial Banks industry and the overall market, HANCOCK HOLDING CO's return on equity is below that of both the industry average and the S&P 500.
- The share price of HANCOCK HOLDING CO has not done very well: it is down 19.83% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Hancock Ratings Report.
- CVI, with its decline in revenue, underperformed when compared the industry average of 32.6%. Since the same quarter one year prior, revenues fell by 45.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- CVR ENERGY INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, CVR ENERGY INC reported lower earnings of $1.95 versus $2.00 in the prior year. For the next year, the market is expecting a contraction of 56.7% in earnings ($0.85 versus $1.95).
- Net operating cash flow has significantly decreased to -$75.50 million or 168.94% 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 CVR Energy Ratings Report.
- Our dividend calendar.