TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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 "Sell."
Western Asset Mortgage Capital Dividend Yield: 18.20% Western Asset Mortgage Capital (NYSE: WMC) shares currently have a dividend yield of 18.20%. Western Asset Mortgage Capital Corporation operates as a real estate investment trust in the United States. The average volume for Western Asset Mortgage Capital has been 503,000 shares per day over the past 30 days. Western Asset Mortgage Capital has a market cap of $415.0 million and is part of the real estate industry. Shares are down 2.5% 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 Western Asset Mortgage Capital as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:- 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 230.1% when compared to the same quarter one year ago, falling from $15.44 million to -$20.09 million.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, WESTERN ASSET MTG CAPITAL CP's return on equity significantly trails 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 32.95%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 232.43% compared to the year-earlier quarter. 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.
- WESTERN ASSET MTG CAPITAL CP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, WESTERN ASSET MTG CAPITAL CP swung to a loss, reporting -$0.25 versus $2.36 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus -$0.25).
- WMC, with its very weak revenue results, has greatly underperformed against the industry average of 8.1%. Since the same quarter one year prior, revenues plummeted by 118.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Western Asset Mortgage Capital Ratings Report.
Enable Midstream Partners Dividend Yield: 11.60% Enable Midstream Partners (NYSE: ENBL) shares currently have a dividend yield of 11.60%. Enable Midstream Partners, LP owns, operates, and develops gas and crude oil infrastructure assets in the United States. It operates through two segments, Gathering and Processing, and Transportation and Storage. The average volume for Enable Midstream Partners has been 359,200 shares per day over the past 30 days. Enable Midstream Partners has a market cap of $4.6 billion and is part of the energy industry. Shares are up 16.2% 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 Enable Midstream Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ENABLE MIDSTREAM PARTNERS LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for ENABLE MIDSTREAM PARTNERS LP is currently lower than what is desirable, coming in at 26.68%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 11.48% has significantly outperformed against the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 48.27% compared to the year-earlier quarter. 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.
- ENABLE MIDSTREAM PARTNERS LP's earnings per share declined by 48.3% 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ENABLE MIDSTREAM PARTNERS LP swung to a loss, reporting -$1.78 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus -$1.78).
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 46.7% when compared to the same quarter one year ago, falling from $122.00 million to $65.00 million.
- You can view the full Enable Midstream Partners Ratings Report.
Communications Systems Dividend Yield: 10.40% Communications Systems (NASDAQ: JCS) shares currently have a dividend yield of 10.40%. Communications Systems, Inc., together with its subsidiaries, manufactures and sells connectivity infrastructure products, core media and rate conversion products, and IT solutions primarily in North America, Europe, the Middle East, and Africa. The average volume for Communications Systems has been 8,000 shares per day over the past 30 days. Communications Systems has a market cap of $53.7 million and is part of the telecommunications industry. Shares are down 12.1% 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 Communications Systems as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Communications Equipment industry. The net income has significantly decreased by 457.3% when compared to the same quarter one year ago, falling from -$1.03 million to -$5.74 million.
- 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 Communications Equipment industry and the overall market, COMMUNICATIONS SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for COMMUNICATIONS SYSTEMS INC is currently lower than what is desirable, coming in at 30.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -20.73% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.38%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 450.00% compared to the year-earlier quarter. 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.
- COMMUNICATIONS SYSTEMS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, COMMUNICATIONS SYSTEMS INC swung to a loss, reporting -$1.11 versus $0.23 in the prior year. This year, the market expects an improvement in earnings (-$0.29 versus -$1.11).
- You can view the full Communications Systems Ratings Report.
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