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."Seaspan Dividend Yield: 8.20% Seaspan (NYSE: SSW) shares currently have a dividend yield of 8.20%. Seaspan Corporation operates as an independent charter owner and manager of containerships in Hong Kong. The company charters its containerships pursuant to long-term, fixed-rate time charters to various container liner companies. The company has a P/E ratio of 12.56. The average volume for Seaspan has been 338,100 shares per day over the past 30 days. Seaspan has a market cap of $1.8 billion and is part of the transportation industry. Shares are up 11.2% 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 Seaspan as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 17.5%. Since the same quarter one year prior, revenues rose by 15.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Marine industry. The net income increased by 174.4% when compared to the same quarter one year prior, rising from $27.77 million to $76.21 million.
- After a year of stock price fluctuations, the net result is that SSW'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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The debt-to-equity ratio is very high at 2.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SSW's quick ratio is somewhat strong at 1.18, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has declined marginally to $96.64 million or 2.00% 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 Seaspan Ratings Report.
- The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.77, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 95.00% to $2.89 million when compared to the same quarter last year. In addition, ELLOMAY CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -52.70%.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market, ELLOMAY CAPITAL LTD's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Independent Power Producers & Energy Traders industry average. The net income has decreased by 8.0% when compared to the same quarter one year ago, dropping from $5.39 million to $4.96 million.
- ELLOMAY CAPITAL LTD's earnings per share declined by 8.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, ELLOMAY CAPITAL LTD reported lower earnings of $0.61 versus $0.94 in the prior year.
- You can view the full Ellomay Capital Ratings Report.
- GARS's revenue growth has slightly outpaced the industry average of 1.8%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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.
- Net operating cash flow has significantly increased by 211.88% to $39.18 million when compared to the same quarter last year. In addition, GARRISON CAPITAL INC has also vastly surpassed the industry average cash flow growth rate of 143.97%.
- The gross profit margin for GARRISON CAPITAL INC is currently very high, coming in at 76.63%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.82% is in-line with the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Capital Markets industry and the overall market, GARRISON CAPITAL INC's return on equity is below that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.99%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 103.33% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full Garrison Capital Ratings Report.
- Our dividend calendar.