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." Comtech Telecommunications Dividend Yield: 9.10% Comtech Telecommunications (NASDAQ: CMTL) shares currently have a dividend yield of 9.10%. Comtech Telecommunications Corp. designs, develops, produces, and markets products, systems, and services for communications solutions in the United States and internationally. The average volume for Comtech Telecommunications has been 402,800 shares per day over the past 30 days. Comtech Telecommunications has a market cap of $212.5 million and is part of the telecommunications industry. Shares are down 33% year-to-date as of the close of trading on Wednesday. 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 Comtech Telecommunications 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- CMTL's very impressive revenue growth greatly exceeded the industry average of 0.2%. Since the same quarter one year prior, revenues leaped by 73.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- CMTL's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.34 is sturdy.
- 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 Communications Equipment industry. The net income has significantly decreased by 389.4% when compared to the same quarter one year ago, falling from $4.96 million to -$14.36 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 Communications Equipment industry and the overall market on the basis of return on equity, COMTECH TELECOMMUN underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Comtech Telecommunications Ratings Report.
- The revenue growth came in higher than the industry average of 23.9%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $68.60 million or 40.55% when compared to the same quarter last year. In addition, GOLAR LNG PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -49.64%.
- The gross profit margin for GOLAR LNG PARTNERS LP is currently very high, coming in at 82.18%. Regardless of GMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GMLP's net profit margin of 16.57% significantly outperformed against the industry.
- The share price of GOLAR LNG PARTNERS LP has not done very well: it is down 23.93% 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 debt-to-equity ratio is very high at 2.93 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. 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 Golar LNG Partners Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 7.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- INVESTORS REAL ESTATE TRUST has improved earnings per share by 20.0% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, INVESTORS REAL ESTATE TRUST increased its bottom line by earning $0.08 versus $0.04 in the prior year. For the next year, the market is expecting a contraction of 87.5% in earnings ($0.01 versus $0.08).
- Net operating cash flow has decreased to $19.55 million or 41.46% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- IRET has underperformed the S&P 500 Index, declining 12.44% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Investors Real Estate Ratings Report.
- Our dividend calendar.