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: 6.70% Macquarie Infrastructure (NYSE: MIC) shares currently have a dividend yield of 6.70%. 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 company has a P/E ratio of 649.73. The average volume for Macquarie Infrastructure has been 638,400 shares per day over the past 30 days. Macquarie Infrastructure has a market cap of $5.7 billion and is part of the transportation industry. Shares are down 1.9% 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 good cash flow from operations, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and generally higher debt management risk. Highlights from the ratings report include:
- Net operating cash flow has increased to $148.57 million or 26.96% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.76%.
- The gross profit margin for MACQUARIE INFRASTRUCTURE CP is rather high; currently it is at 62.28%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MIC's net profit margin of 5.63% significantly trails the industry average.
- MACQUARIE INFRASTRUCTURE CP reported significant earnings per share improvement 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 ($1.65 versus -$1.48).
- 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.
- MIC has underperformed the S&P 500 Index, declining 17.80% from its price level of one year ago. 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 Macquarie Infrastructure Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
- Net operating cash flow has decreased to $31.47 million or 11.85% 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.
- 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 91.9% when compared to the same quarter one year ago, falling from $29.51 million to $2.38 million.
- You can view the full Washington REIT Ratings Report.
- APO, with its very weak revenue results, has greatly underperformed against the industry average of 24.3%. Since the same quarter one year prior, revenues plummeted by 60.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- APOLLO GLOBAL MANAGEMENT LLC 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, APOLLO GLOBAL MANAGEMENT LLC reported lower earnings of $0.61 versus $0.64 in the prior year. This year, the market expects an improvement in earnings ($1.01 versus $0.61).
- 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 Capital Markets industry. The net income has significantly decreased by 206.1% when compared to the same quarter one year ago, falling from $30.93 million to -$32.83 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.89%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 311.11% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, APO is still more expensive than most of the other companies in its industry.
- You can view the full Apollo Global Management Ratings Report.
- Our dividend calendar.