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."Ship Finance International Dividend Yield: 12.00% Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 12.00%. Ship Finance International Limited owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. It is also involved in the charter, purchase, and sale of assets. The company has a P/E ratio of 8.09. The average volume for Ship Finance International has been 822,300 shares per day over the past 30 days. Ship Finance International has a market cap of $1.4 billion and is part of the transportation industry. Shares are down 10.9% year-to-date as of the close of trading on Tuesday. 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 Ship Finance International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 24.5%. Since the same quarter one year prior, revenues rose by 30.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SHIP FINANCE INTL LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SHIP FINANCE INTL LTD increased its bottom line by earning $1.87 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $1.87).
- SFL has underperformed the S&P 500 Index, declining 7.33% from its price level of one year ago. 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.
- The debt-to-equity ratio of 1.39 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- You can view the full Ship Finance International Ratings Report.
- The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for MATTEL INC is rather high; currently it is at 51.61%. Regardless of MAT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MAT's net profit margin of -8.39% significantly underperformed when compared to the industry average.
- 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 Leisure Equipment & Products industry and the overall market on the basis of return on equity, MATTEL INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has significantly decreased to -$89.25 million or 68.05% 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 Mattel Ratings Report.
- 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 company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 48.5% when compared to the same quarter one year prior, rising from $33.51 million to $49.77 million.
- Net operating cash flow has slightly increased to $59.22 million or 2.24% when compared to the same quarter last year. Despite an increase in cash flow, LEXINGTON REALTY TRUST's average is still marginally south of the industry average growth rate of 11.76%.
- LEXINGTON REALTY TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, LEXINGTON REALTY TRUST increased its bottom line by earning $0.44 versus $0.17 in the prior year. For the next year, the market is expecting a contraction of 4.5% in earnings ($0.42 versus $0.44).
- 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, LEXINGTON REALTY TRUST's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Lexington Realty Ratings Report.
- Our dividend calendar.