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 5 stocks with substantial yields, that ultimately, we have rated "Hold." Inergy L.P (NYSE: NRGY) shares currently have a dividend yield of 7.80%. Inergy, L.P., an integrated energy midstream master limited partnership, engages in the storage and transportation of natural gas and natural gas liquids (NGL) in the United States and Canada. The company has a P/E ratio of 3.80. The average volume for Inergy L.P has been 772,100 shares per day over the past 30 days. Inergy L.P has a market cap of $2.0 billion and is part of the energy industry. Shares are down 19.2% year to date as of the close of trading on Thursday. TheStreet Ratings rates Inergy L.P as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- Compared to its closing price of one year ago, NRGY's share price has jumped by 29.81%, exceeding the performance of the broader market during that same time frame. 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 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, INERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- NRGY, with its decline in revenue, underperformed when compared the industry average of 10.6%. Since the same quarter one year prior, revenues fell by 32.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for INERGY LP is rather low; currently it is at 18.60%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -1.28% is significantly below that of the industry average.
- Net operating cash flow has decreased to $121.00 million or 29.36% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, INERGY LP has marginally lower results.
- You can view the full Inergy L.P Ratings Report.
Check Out Our Best Services for Investors
Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
Check Out Our Best Services for Investors
Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.