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."Old National Bancorp Dividend Yield: 4.40% Old National Bancorp (NASDAQ: ONB) shares currently have a dividend yield of 4.40%. Old National Bancorp operates as the holding company for Old National Bank, which provides various financial services to individual and commercial customers in the United States. It operates in two segments, Banking and Insurance. The company has a P/E ratio of 11.90. The average volume for Old National Bancorp has been 1,173,300 shares per day over the past 30 days. Old National Bancorp has a market cap of $1.4 billion and is part of the banking industry. Shares are down 11.8% year-to-date as of the close of trading on Wednesday. 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 Old National Bancorp 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 a generally disappointing performance in the stock itself and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 5.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- OLD NATIONAL BANCORP has improved earnings per share by 8.0% 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, OLD NATIONAL BANCORP increased its bottom line by earning $1.00 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $1.00).
- The gross profit margin for OLD NATIONAL BANCORP is currently very high, coming in at 93.87%. Regardless of ONB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ONB's net profit margin of 20.59% compares favorably to the industry average.
- Net operating cash flow has decreased to $57.55 million or 11.26% when compared to the same quarter last year. Despite a decrease in cash flow OLD NATIONAL BANCORP is still fairing well by exceeding its industry average cash flow growth rate of -54.50%.
- ONB has underperformed the S&P 500 Index, declining 14.10% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Old National Bancorp Ratings Report.
- PSEC's revenue growth has slightly outpaced the industry average of 1.8%. Since the same quarter one year prior, revenues slightly increased by 5.2%. 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 234.83% to $169.17 million when compared to the same quarter last year. In addition, PROSPECT CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 143.97%.
- The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.41%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -45.47% 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, PROSPECT CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- The share price of PROSPECT CAPITAL CORP has not done very well: it is down 13.97% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Prospect Capital Ratings Report.
- ASTRAZENECA PLC 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, ASTRAZENECA PLC increased its bottom line by earning $1.12 versus $0.49 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.12).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 351.7% when compared to the same quarter one year prior, rising from -$321.00 million to $808.00 million.
- 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 Pharmaceuticals industry and the overall market on the basis of return on equity, ASTRAZENECA PLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- AZN has underperformed the S&P 500 Index, declining 17.71% from its price level of one year ago. 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.
- Net operating cash flow has significantly decreased to $571.00 million or 69.00% 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 AstraZeneca Ratings Report.
- Our dividend calendar.