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."Medical Properties Dividend Yield: 6.10% Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.10%. Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 21.26. The average volume for Medical Properties has been 2,436,400 shares per day over the past 30 days. Medical Properties has a market cap of $3.6 billion and is part of the real estate industry. Shares are up 31.2% year-to-date as of the close of trading on Friday. 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 Medical Properties as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 35.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The gross profit margin for MEDICAL PROPERTIES TRUST is currently very high, coming in at 83.04%. Regardless of MPW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MPW's net profit margin of 44.55% compares favorably to the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, MEDICAL PROPERTIES TRUST's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Medical Properties Ratings Report.
- STX, with its decline in revenue, slightly underperformed the industry average of 12.8%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- SEAGATE TECHNOLOGY PLC 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SEAGATE TECHNOLOGY PLC increased its bottom line by earning $5.22 versus $4.52 in the prior year. For the next year, the market is expecting a contraction of 67.3% in earnings ($1.71 versus $5.22).
- The debt-to-equity ratio is very high at 2.45 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, STX's quick ratio is somewhat strong at 1.09, demonstrating the ability to handle short-term liquidity needs.
- 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 Computers & Peripherals industry. The net income has significantly decreased by 106.9% when compared to the same quarter one year ago, falling from $291.00 million to -$20.00 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 54.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 107.95% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full Seagate Technology Ratings Report.
- ARTISAN PARTNERS ASSET MGMT's earnings per share declined by 18.6% 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, ARTISAN PARTNERS ASSET MGMT turned its bottom line around by earning $1.84 versus -$0.72 in the prior year. This year, the market expects an improvement in earnings ($2.29 versus $1.84).
- Despite the weak revenue results, APAM has outperformed against the industry average of 24.4%. Since the same quarter one year prior, revenues fell by 14.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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. Compared to other companies in the Capital Markets industry and the overall market, ARTISAN PARTNERS ASSET MGMT's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $111.69 million or 13.22% when compared to the same quarter last year. Despite a decrease in cash flow of 13.22%, ARTISAN PARTNERS ASSET MGMT is still significantly exceeding the industry average of -200.02%.
- The gross profit margin for ARTISAN PARTNERS ASSET MGMT is currently lower than what is desirable, coming in at 32.03%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 9.31% trails that of the industry average.
- You can view the full Artisan Partners Asset Management Ratings Report.
- Our dividend calendar.