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."CYS Investments Dividend Yield: 11.30% CYS Investments (NYSE: CYS) shares currently have a dividend yield of 11.30%. CYS Investments, Inc., a specialty finance company, makes leveraged investments in whole-pool residential mortgage pass-through securities where the principal and interest payments are guaranteed. The company has a P/E ratio of 10.06. The average volume for CYS Investments has been 1,461,600 shares per day over the past 30 days. CYS Investments has a market cap of $1.3 billion and is part of the real estate industry. Shares are up 25.5% year-to-date as of the close of trading on Friday. 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 CYS Investments as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we find that the company's revenue growth has not been good. Highlights from the ratings report include:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
- 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 157.9% when compared to the same quarter one year prior, rising from -$97.04 million to $56.21 million.
- CYS INVESTMENTS INC 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, CYS INVESTMENTS INC swung to a loss, reporting -$0.17 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus -$0.17).
- CYS, with its decline in revenue, underperformed when compared the industry average of 10.4%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full CYS Investments Ratings Report.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 35.27% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 5.5% when compared to the same quarter one year prior, going from $29.14 million to $30.75 million.
- The gross profit margin for SELECT INCOME REIT is rather high; currently it is at 50.98%. Regardless of SIR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SIR's net profit margin of 26.64% compares favorably to the industry average.
- SELECT INCOME REIT's earnings per share improvement from the most recent quarter was slightly positive. 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, SELECT INCOME REIT reported lower earnings of $0.84 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($1.45 versus $0.84).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Select Income REIT Ratings Report.
- NOK's very impressive revenue growth greatly exceeded the industry average of 1.0%. Since the same quarter one year prior, revenues leaped by 102.5%. 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.
- NOK's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NOK has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
- 46.58% is the gross profit margin for NOKIA CORP 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 -9.15% is in-line with the industry average.
- NOKIA CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, NOKIA CORP reported lower earnings of $0.33 versus $0.82 in the prior year. For the next year, the market is expecting a contraction of 33.3% in earnings ($0.22 versus $0.33).
- 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 407.3% when compared to the same quarter one year ago, falling from $190.12 million to -$584.31 million.
- You can view the full Nokia Oyj Ratings Report.
- Our dividend calendar.