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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Buy." Calumet Specialty Products Partners (NASDAQ: CLMT) shares currently have a dividend yield of 7.30%. Calumet Specialty Products Partners, L.P. produces and sells specialty hydrocarbon and fuel products in North America. It operates in two segments, Specialty Products and Fuel Products. The company has a P/E ratio of 10.23. The average volume for Calumet Specialty Products Partners has been 665,800 shares per day over the past 30 days. Calumet Specialty Products Partners has a market cap of $2.3 billion and is part of the energy industry. Shares are up 17.8% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Calumet Specialty Products Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 19.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 43.13% and other important driving factors, this stock has surged by 37.86% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- 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 70.2% when compared to the same quarter one year prior, rising from $26.87 million to $45.74 million.
- Net operating cash flow has increased to $90.67 million or 40.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.63%.
- You can view the full Calumet Specialty Products Partners Ratings Report.
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