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."M.D.C. Holdings Dividend Yield: 4.20% M.D.C. Holdings (NYSE: MDC) shares currently have a dividend yield of 4.20%. M.D.C. Holdings, Inc., through its subsidiaries, engages in homebuilding and financial services businesses in the United States. The company has a P/E ratio of 18.25. The average volume for M.D.C. Holdings has been 725,400 shares per day over the past 30 days. M.D.C. Holdings has a market cap of $1.2 billion and is part of the materials & construction industry. Shares are down 5.6% year-to-date as of the close of trading on Monday. 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 M.D.C. Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 14.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MDC HOLDINGS INC reported significant earnings per share improvement 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, MDC HOLDINGS INC increased its bottom line by earning $1.34 versus $1.29 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.34).
- MDC's debt-to-equity ratio of 0.75 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.
- MDC has underperformed the S&P 500 Index, declining 14.38% 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 gross profit margin for MDC HOLDINGS INC is rather low; currently it is at 17.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.90% trails that of the industry average.
- You can view the full M.D.C. Holdings Ratings Report.
- The revenue growth greatly exceeded the industry average of 34.7%. Since the same quarter one year prior, revenues rose by 28.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SHIP FINANCE INTL LTD reported significant earnings per share improvement 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, SHIP FINANCE INTL LTD increased its bottom line by earning $1.87 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $1.87).
- SFL has underperformed the S&P 500 Index, declining 12.28% 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 1.34 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, SFL's quick ratio is somewhat strong at 1.32, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Ship Finance International Ratings Report.
- Net operating cash flow has increased to $20.24 million or 49.66% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.64%.
- PKY, with its decline in revenue, underperformed when compared the industry average of 7.9%. Since the same quarter one year prior, revenues fell by 10.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for PARKWAY PROPERTIES INC is rather low; currently it is at 20.71%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, PKY's net profit margin of 7.60% 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 79.5% when compared to the same quarter one year ago, falling from $42.43 million to $8.68 million.
- You can view the full Parkway Properties Ratings Report.
- Our dividend calendar.