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."Banco Santander Brasil SA/Brazil Dividend Yield: 9.40% Banco Santander Brasil SA/Brazil (NYSE: BSBR) shares currently have a dividend yield of 9.40%. Banco Santander (Brasil) S.A. provides banking products and services in Brazil and internationally. The company offers commercial banking, investment, mortgage, leasing, credit card, and foreign exchange services, as well as various lending and financing services. The average volume for Banco Santander Brasil SA/Brazil has been 1,511,500 shares per day over the past 30 days. Banco Santander Brasil SA/Brazil has a market cap of $34.3 billion and is part of the banking industry. Shares are up 16.4% year-to-date as of the close of trading on Thursday. 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 Banco Santander Brasil SA/Brazil as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANCO SANTANDER BRASIL -ADR has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- BSBR, with its very weak revenue results, has greatly underperformed against the industry average of 5.3%. Since the same quarter one year prior, revenues plummeted by 81.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- After a year of stock price fluctuations, the net result is that BSBR's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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 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 Banks industry. The net income has significantly decreased by 105.7% when compared to the same quarter one year ago, falling from $403.93 million to -$23.18 million.
- Net operating cash flow has significantly decreased to $1,373.12 million or 84.44% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Banco Santander Brasil SA/Brazil Ratings Report.
- The revenue growth greatly exceeded the industry average of 18.5%. Since the same quarter one year prior, revenues rose by 14.5%. 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 gross profit margin for SEASPAN CORP is currently very high, coming in at 70.44%. Regardless of SSW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SSW's net profit margin of 9.62% compares favorably to the industry average.
- SEASPAN CORP 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SEASPAN CORP reported lower earnings of $0.78 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.78).
- 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 Marine industry and the overall market, SEASPAN CORP's return on equity is below that of both the industry average and the S&P 500.
- 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 68.7% when compared to the same quarter one year ago, falling from $65.44 million to $20.49 million.
- You can view the full Seaspan Ratings Report.
- The revenue growth came in higher than the industry average of 18.5%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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. Compared to other companies in the Marine industry and the overall market, COSTAMARE INC's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $65.13 million or 4.14% when compared to the same quarter last year. Despite an increase in cash flow, COSTAMARE INC's cash flow growth rate is still lower than the industry average growth rate of 19.70%.
- CMRE'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 54.88%, 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. 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.
- Currently the debt-to-equity ratio of 1.62 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Costamare Ratings Report.
- Our dividend calendar.