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." Fibria Celulose Dividend Yield: 4.40% Fibria Celulose (NYSE: FBR) shares currently have a dividend yield of 4.40%. Fibria Celulose S.A. engages in the production, sale, and export of short fiber pulp. The company primarily offers bleached eucalyptus kraft pulp used in the manufacture of tissue, coated and uncoated printing and writing paper, and coated packaging boards. The company has a P/E ratio of 11.18. The average volume for Fibria Celulose has been 1,465,100 shares per day over the past 30 days. Fibria Celulose has a market cap of $3.8 billion and is part of the consumer non-durables industry. Shares are down 45.9% 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 Fibria Celulose as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- FBR's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 7.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 1.41, which illustrates the ability to avoid short-term cash problems.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Paper & Forest Products industry average, but is greater than that of the S&P 500. The net income increased by 253.6% when compared to the same quarter one year prior, rising from -$178.80 million to $274.72 million.
- FBR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.91%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- You can view the full Fibria Celulose Ratings Report.
- Net operating cash flow has slightly increased to $1,575.00 million or 7.58% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -39.16%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.8%. Since the same quarter one year prior, revenues fell by 10.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HPQ has underperformed the S&P 500 Index, declining 7.77% 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 company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Computers & Peripherals industry. The net income has significantly decreased by 37.8% when compared to the same quarter one year ago, falling from $1,011.00 million to $629.00 million.
- The gross profit margin for HP INC is rather low; currently it is at 20.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.42% significantly trails the industry average.
- You can view the full HP Ratings Report.
- BKS's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.8%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. Compared to other companies in the Specialty Retail industry and the overall market, BARNES & NOBLE INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Specialty Retail industry. The net income has significantly decreased by 57.6% when compared to the same quarter one year ago, falling from -$19.42 million to -$30.61 million.
- The gross profit margin for BARNES & NOBLE INC is currently lower than what is desirable, coming in at 30.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.49% is significantly below that of the industry average.
- You can view the full Barnes & Noble Ratings Report.
- Our dividend calendar.