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: 6.80% Macquarie Infrastructure (NYSE: MIC) shares currently have a dividend yield of 6.80%. Macquarie Infrastructure Company LLC, through its subsidiaries, owns, operates, and invests in infrastructure businesses that provide services to businesses, government agencies, and individuals primarily in the United States. The average volume for Macquarie Infrastructure has been 840,200 shares per day over the past 30 days. Macquarie Infrastructure has a market cap of $5.4 billion and is part of the transportation industry. Shares are down 7.3% 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 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 company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Transportation Infrastructure industry average. 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 26.99%.
- 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 ($1.76 versus -$1.48).
- MIC has underperformed the S&P 500 Index, declining 18.05% 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.
- The gross profit margin for BANK OF MONTREAL is currently very high, coming in at 79.66%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.41% is above that of the industry average.
- BANK OF MONTREAL has improved earnings per share by 8.2% 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. During the past fiscal year, BANK OF MONTREAL increased its bottom line by earning $6.58 versus $6.41 in the prior year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 7.5% when compared to the same quarter one year prior, going from $986.00 million to $1,060.00 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. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF MONTREAL has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has declined marginally to $9,419.00 million or 3.92% when compared to the same quarter last year. Despite a decrease in cash flow of 3.92%, BANK OF MONTREAL is still significantly exceeding the industry average of -54.50%.
- You can view the full Bank of Montreal Ratings Report.
- GAMESTOP CORP has improved earnings per share by 5.8% 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, GAMESTOP CORP increased its bottom line by earning $3.81 versus $3.54 in the prior year. This year, the market expects an improvement in earnings ($4.01 versus $3.81).
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 1.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has slightly increased to $468.70 million or 5.58% when compared to the same quarter last year. Despite an increase in cash flow, GAMESTOP CORP's average is still marginally south of the industry average growth rate of 7.94%.
- The gross profit margin for GAMESTOP CORP is currently lower than what is desirable, coming in at 29.59%. Regardless of GME's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GME's net profit margin of 7.02% compares favorably to the industry average.
- GME has underperformed the S&P 500 Index, declining 16.42% 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.
- You can view the full GameStop Ratings Report.
- Our dividend calendar.