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."Sanofi Dividend Yield: 4.20% Sanofi (NYSE: SNY) shares currently have a dividend yield of 4.20%. Sanofi researches, develops, manufactures, and markets various therapeutic solutions. The company operates in three segments: Pharmaceuticals, Vaccines, and Animal Health. The company has a P/E ratio of 21.72. The average volume for Sanofi has been 1,888,300 shares per day over the past 30 days. Sanofi has a market cap of $101.5 billion and is part of the drugs industry. Shares are down 8.9% 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 Sanofi as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- SNY's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for SANOFI is rather high; currently it is at 59.28%. Regardless of SNY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.76% trails the industry average.
- 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 Pharmaceuticals industry. The net income has significantly decreased by 83.3% when compared to the same quarter one year ago, falling from $1,459.54 million to $242.91 million.
- 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. In comparison to the other companies in the Pharmaceuticals industry and the overall market, SANOFI's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Sanofi Ratings Report.
- SIR's very impressive revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues leaped by 106.3%. 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.
- The gross profit margin for SELECT INCOME REIT is rather high; currently it is at 52.95%. Regardless of SIR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SIR's net profit margin of 9.34% is significantly lower than the industry average.
- 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 59.5% when compared to the same quarter one year ago, falling from $26.89 million to $10.88 million.
- 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. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Select Income REIT Ratings Report.
- CVI's debt-to-equity ratio of 0.68 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CVI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.82 is high and demonstrates strong liquidity.
- CVI, with its decline in revenue, underperformed when compared the industry average of 34.7%. 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 41.4% in earnings ($1.14 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.