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." EV Energy Partner (NASDAQ: EVEP) shares currently have a dividend yield of 8.50%. EV Energy Partners, L.P. engages in the acquisition, development, and production of oil and natural gas properties in the United States. The average volume for EV Energy Partner has been 316,200 shares per day over the past 30 days. EV Energy Partner has a market cap of $1.8 billion and is part of the energy industry. Shares are up 7.2% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates EV Energy Partner as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 18.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 75.4% when compared to the same quarter one year prior, rising from -$50.02 million to -$12.31 million.
- The gross profit margin for EV ENERGY PARTNERS LP is rather high; currently it is at 63.11%. 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 -15.12% is in-line with the industry average.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EV ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $48.83 million or 21.23% 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 EV Energy Partner Ratings Report.
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