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."Hudson Global Dividend Yield: 9.10% Hudson Global (NASDAQ: HSON) shares currently have a dividend yield of 9.10%. Hudson Global, Inc. provides professional-level recruitment and related talent solutions for small to large-sized corporations and government agencies worldwide. The company has a P/E ratio of 14.67. The average volume for Hudson Global has been 46,500 shares per day over the past 30 days. Hudson Global has a market cap of $75.3 million and is part of the diversified services industry. Shares are down 25% 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 Hudson Global as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. 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 Professional Services industry. The net income increased by 49.0% when compared to the same quarter one year prior, rising from -$6.84 million to -$3.49 million.
- HSON's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, HSON has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.
- 40.76% is the gross profit margin for HUDSON GLOBAL INC which we consider to be strong. 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 -3.44% is in-line with the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Professional Services industry and the overall market, HUDSON GLOBAL INC's return on equity is below that of both the industry average and the S&P 500.
- In its most recent trading session, HSON has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- You can view the full Hudson Global Ratings Report.
- The revenue growth came in higher than the industry average of 24.3%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for ARLINGTON ASSET INVESTMENT is currently very high, coming in at 118.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 149.59% significantly outperformed against the industry average.
- ARLINGTON ASSET INVESTMENT has improved earnings per share by 25.0% 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, ARLINGTON ASSET INVESTMENT swung to a loss, reporting -$3.02 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($2.77 versus -$3.02).
- Net operating cash flow has declined marginally to $21.22 million or 4.26% when compared to the same quarter last year. Despite a decrease in cash flow of 4.26%, ARLINGTON ASSET INVESTMENT is still significantly exceeding the industry average of -146.35%.
- 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, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth greatly exceeded the industry average of 23.9%. Since the same quarter one year prior, revenues rose by 44.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NAVIOS MARITIME MIDSTR PN LP has improved earnings per share by 9.1% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NAVIOS MARITIME MIDSTR PN LP increased its bottom line by earning $1.35 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $1.35).
- The gross profit margin for NAVIOS MARITIME MIDSTR PN LP is currently very high, coming in at 95.66%. Regardless of NAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NAP's net profit margin of 31.03% significantly outperformed against the industry.
- NAP's debt-to-equity ratio of 0.71 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 8.76 is very high and demonstrates very strong liquidity.
- NAP'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 27.19%, 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.
- You can view the full Navios Maritime Midstream Partners Ratings Report.
- Our dividend calendar.