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.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 13.5% when compared to the same quarter one year prior, going from $274.00 million to $311.00 million.
- Net operating cash flow has significantly increased by 89.72% to $960.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -49.64%.
- ENERGY TRANSFER PARTNERS -LP has improved earnings per share by 11.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENERGY TRANSFER PARTNERS -LP swung to a loss, reporting -$0.08 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus -$0.08).
- ETP'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 28.49%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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. To add to this, ETP has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Energy Transfer Partners Ratings Report.
- Net operating cash flow has significantly increased by 74.35% to -$131.68 million when compared to the same quarter last year. In addition, TWO HARBORS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 11.78%.
- The gross profit margin for TWO HARBORS INVESTMENT CORP is rather high; currently it is at 68.68%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TWO's net profit margin of -72.97% significantly underperformed when compared to the industry average.
- The share price of TWO HARBORS INVESTMENT CORP has not done very well: it is down 16.70% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 193.8% when compared to the same quarter one year ago, falling from $94.79 million to -$88.93 million.
- You can view the full Two Harbors Investment Ratings Report.
- Our dividend calendar.