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." Textainer Group Holdings Dividend Yield: 9.00% Textainer Group Holdings (NYSE: TGH) shares currently have a dividend yield of 9.00%. Textainer Group Holdings Limited, through with its subsidiaries, engages in the purchase, ownership, management, leasing, and disposal of a fleet of intermodal containers worldwide. It operates through three segments: Container Ownership, Container Management, and Container Resale. The company has a P/E ratio of 5.62. The average volume for Textainer Group Holdings has been 270,900 shares per day over the past 30 days. Textainer Group Holdings has a market cap of $604.2 million and is part of the diversified services industry. Shares are down 19.9% 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 Textainer Group Holdings as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for TEXTAINER GROUP HOLDINGS LTD is currently very high, coming in at 84.75%. Regardless of TGH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.63% trails the industry average.
- TGH, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. Weakness in the company's revenue seems to have hurt the 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. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, TEXTAINER GROUP HOLDINGS LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has decreased to $70.58 million or 20.66% 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.
- You can view the full Textainer Group Holdings Ratings Report.