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."Outerwall Dividend Yield: 5.80% Outerwall (NASDAQ: OUTR) shares currently have a dividend yield of 5.80%. Outerwall Inc., through its subsidiaries, provides automated retail solutions primarily in the United States, Canada, Puerto Rico, Ireland, and the United Kingdom. The company has a P/E ratio of 14.68. The average volume for Outerwall has been 494,000 shares per day over the past 30 days. Outerwall has a market cap of $710.1 million and is part of the specialty retail industry. Shares are up 14.3% 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 Outerwall as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, notable return on equity and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 8.0% when compared to the same quarter one year prior, going from $35.60 million to $38.45 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, OUTERWALL INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- OUTERWALL INC's earnings per share improvement from the most recent quarter was slightly positive. 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, OUTERWALL INC reported lower earnings of $2.69 versus $6.04 in the prior year. This year, the market expects an improvement in earnings ($6.24 versus $2.69).
- The gross profit margin for OUTERWALL INC is currently lower than what is desirable, coming in at 29.85%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.17% trails that of the industry average.
- Net operating cash flow has decreased to $67.21 million or 36.64% 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 Outerwall Ratings Report.
- The gross profit margin for LLOYDS BANKING GROUP PLC is rather high; currently it is at 66.54%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, LYG's net profit margin of 10.39% significantly trails the industry average.
- Compared to its price level of one year ago, LYG is down 19.67% to its most recent closing price of 4.33. Looking ahead, our view is that this company's fundamentals will not have much impact either way, allowing the stock to generally move up or down based on the push and pull of the broad market.
- LYG, with its decline in revenue, underperformed when compared the industry average of 1.1%. Since the same quarter one year prior, revenues fell by 30.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 Commercial Banks industry. The net income has significantly decreased by 46.3% when compared to the same quarter one year ago, falling from $1,355.81 million to $727.68 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, LLOYDS BANKING GROUP PLC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Lloyds Banking Group Ratings Report.
- The revenue growth greatly exceeded the industry average of 15.7%. Since the same quarter one year prior, revenues rose by 35.1%. 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.
- The gross profit margin for PATTERN ENERGY GROUP INC is rather high; currently it is at 63.21%. 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 -27.00% is in-line with the industry average.
- PATTERN ENERGY GROUP INC's earnings per share declined by 6.7% 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, PATTERN ENERGY GROUP INC continued to lose money by earning -$0.46 versus -$0.55 in the prior year. This year, the market expects an improvement in earnings (-$0.27 versus -$0.46).
- 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 Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, PATTERN ENERGY GROUP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Although PEGI's debt-to-equity ratio of 2.31 is very high, it is currently less than that of the industry average. Along with this, the company manages to maintain a quick ratio of 0.27, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Pattern Energy Group Ratings Report.
- Our dividend calendar.