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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Marine industry. The net income increased by 33.1% when compared to the same quarter one year prior, rising from $26.28 million to $35.00 million.
- 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 Marine industry and the overall market, COSTAMARE INC's return on equity exceeds that of both the industry average and the S&P 500.
- Despite the weak revenue results, CMRE has outperformed against the industry average of 12.8%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- CMRE'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 59.24%, 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.
- Currently the debt-to-equity ratio of 1.55 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Costamare Ratings Report.
- Net operating cash flow has slightly increased to $120.73 million or 6.36% when compared to the same quarter last year. In addition, APOLLO INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -199.57%.
- The gross profit margin for APOLLO INVESTMENT CORP is currently very high, coming in at 72.58%. 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 -27.41% is in-line with the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 23.7%. Since the same quarter one year prior, revenues fell by 16.4%. 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 Capital Markets industry. The net income has significantly decreased by 99.5% when compared to the same quarter one year ago, falling from -$11.73 million to -$23.40 million.
- 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, APOLLO INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Apollo Investment Ratings Report.
- Our dividend calendar.