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."Starwood Property Dividend Yield: 8.90% Starwood Property (NYSE: STWD) shares currently have a dividend yield of 8.90%. Starwood Property Trust, Inc. originates, acquires, finances, and manages commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate- investments in the United States and Europe. The company has a P/E ratio of 86.16. The average volume for Starwood Property has been 1,897,200 shares per day over the past 30 days. Starwood Property has a market cap of $5.1 billion and is part of the real estate industry. Shares are up 3.9% year-to-date as of the close of trading on Monday. 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 Starwood Property as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 7.9%. 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.
- The gross profit margin for STARWOOD PROPERTY TRUST INC is rather high; currently it is at 55.00%. Regardless of STWD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STWD's net profit margin of 13.35% is significantly lower than the industry average.
- 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 77.8% when compared to the same quarter one year ago, falling from $120.36 million to $26.66 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, STARWOOD PROPERTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Starwood Property Ratings Report.
- Net operating cash flow has increased to $779.00 million or 16.44% when compared to the same quarter last year. In addition, WILLIAMS COS INC has also vastly surpassed the industry average cash flow growth rate of -49.98%.
- The gross profit margin for WILLIAMS COS INC is rather high; currently it is at 57.29%. 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 -3.91% trails the industry average.
- Despite the weak revenue results, WMB has outperformed against the industry average of 24.0%. Since the same quarter one year prior, revenues slightly dropped by 3.3%. Weakness in the company's revenue seems to have hurt the 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 192.8% when compared to the same quarter one year ago, falling from $70.00 million to -$65.00 million.
- The debt-to-equity ratio is very high at 4.36 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 0.32, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Williams Companies Ratings Report.
- HFC's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that HFC's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
- The gross profit margin for HOLLYFRONTIER CORP is currently extremely low, coming in at 9.76%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.05% trails that of the industry average.
- Net operating cash flow has significantly decreased to $6.64 million or 97.31% 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 HollyFrontier Ratings Report.
- Our dividend calendar.