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."BP Dividend Yield: 6.90% BP (NYSE: BP) shares currently have a dividend yield of 6.90%. BP p.l.c. operates as an integrated oil and gas company worldwide. It operates through three segments: Upstream, Downstream, and Rosneft. The average volume for BP has been 9,733,600 shares per day over the past 30 days. BP has a market cap of $108.3 billion and is part of the energy industry. Shares are up 8.7% year-to-date as of the close of trading on Thursday. 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 BP as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins. 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 Oil, Gas & Consumable Fuels industry. The net income increased by 75.6% when compared to the same quarter one year prior, rising from -$5,823.00 million to -$1,419.00 million.
- BP PLC reported significant earnings per share improvement 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, BP PLC swung to a loss, reporting -$2.12 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus -$2.12).
- Net operating cash flow has decreased to $3,883.00 million or 38.22% when compared to the same quarter last year. Despite a decrease in cash flow BP PLC is still fairing well by exceeding its industry average cash flow growth rate of -49.90%.
- BP has underperformed the S&P 500 Index, declining 5.42% from its price level of one year ago. 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 BP Ratings Report.
- BXMT's very impressive revenue growth greatly exceeded the industry average of 11.7%. Since the same quarter one year prior, revenues leaped by 58.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BLACKSTONE MORTGAGE TR 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, BLACKSTONE MORTGAGE TR INC increased its bottom line by earning $2.38 versus $1.86 in the prior year. This year, the market expects an improvement in earnings ($2.58 versus $2.38).
- After a year of stock price fluctuations, the net result is that BXMT's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, BLACKSTONE MORTGAGE TR INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Blackstone Mortgage Ratings Report.
- Powered by its strong earnings growth of 37.14% and other important driving factors, this stock has surged by 38.77% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- TERNIUM SA -ADR has improved earnings per share by 37.1% 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, TERNIUM SA -ADR turned its bottom line around by earning $0.05 versus -$1.01 in the prior year. This year, the market expects an improvement in earnings ($2.11 versus $0.05).
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that TX's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
- The gross profit margin for TERNIUM SA -ADR is currently lower than what is desirable, coming in at 27.59%. Regardless of TX's low profit margin, it has managed to increase from the same period last year.
- Net operating cash flow has decreased to $237.42 million or 26.67% 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 Ternium Ratings Report.
- Our dividend calendar.