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." New York REIT Dividend Yield: 4.90% New York REIT (NYSE: NYRT) shares currently have a dividend yield of 4.90%. New York REIT, Inc. focuses on acquiring commercial real estate, as well as acquiring properties or making other real estate investments that relate to office, retail, multi-family residential, industrial, and hotel property types located primarily in New York City. The company has a P/E ratio of 32.66. The average volume for New York REIT has been 1,052,100 shares per day over the past 30 days. New York REIT has a market cap of $1.6 billion and is part of the real estate industry. Shares are down 17.5% 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 New York REIT as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 105.7% when compared to the same quarter one year prior, rising from -$8.52 million to $0.49 million.
- NEW YORK REIT INC 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 year. During the past fiscal year, NEW YORK REIT INC continued to lose money by earning -$0.23 versus -$0.57 in the prior year.
- NYRT, with its decline in revenue, underperformed when compared the industry average of 11.9%. Since the same quarter one year prior, revenues fell by 10.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for NEW YORK REIT INC is currently extremely low, coming in at 2.32%. Regardless of NYRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NYRT's net profit margin of 1.28% is significantly lower than the industry average.
- Net operating cash flow has significantly decreased to $5.71 million or 60.48% 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 New York REIT Ratings Report.