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: 8.30% Seaspan (NYSE: SSW) shares currently have a dividend yield of 8.30%. 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 12.15. The average volume for Seaspan has been 331,000 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 11.6% 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 Seaspan as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk. Highlights from the ratings report include:
- 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.
- The revenue growth significantly trails the industry average of 232.8%. 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 gross profit margin for SEASPAN CORP is rather high; currently it is at 68.75%. Regardless of SSW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SSW's net profit margin of 34.88% significantly outperformed against the industry.
- 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 to the industry average, the firm's growth rate is much lower.
- You can view the full Seaspan Ratings Report.
- CRT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 11.87, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for CROSS TIMBERS ROYALTY TRUST is currently very high, coming in at 100.00%. CRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, CRT's net profit margin of 89.28% significantly outperformed against the industry.
- CRT, with its decline in revenue, slightly underperformed the industry average of 34.3%. Since the same quarter one year prior, revenues fell by 34.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of CROSS TIMBERS ROYALTY TRUST has not done very well: it is down 21.37% 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. 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.
- CROSS TIMBERS ROYALTY TRUST's earnings per share declined by 41.4% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CROSS TIMBERS ROYALTY TRUST reported lower earnings of $1.35 versus $2.67 in the prior year.
- You can view the full Cross Timbers Royalty Ratings Report.
- CORR's very impressive revenue growth greatly exceeded the industry average of 8.0%. Since the same quarter one year prior, revenues leaped by 88.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CORENERGY INFRASTRUCTURE TR has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, CORENERGY INFRASTRUCTURE TR reported lower earnings of $0.82 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($2.61 versus $0.82).
- This stock's share value has moved by only 42.81% over the past year. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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, CORENERGY INFRASTRUCTURE TR'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 CorEnergy Infrastructure Ratings Report.
- Our dividend calendar.