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 "Hold." Capital Product Partners L.P (NASDAQ: CPLP) shares currently have a dividend yield of 12.10%. Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. Currently there are 3 analysts that rate Capital Product Partners L.P a buy, 1 analyst rates it a sell, and 2 rate it a hold. The average volume for Capital Product Partners L.P has been 225,600 shares per day over the past 30 days. Capital Product Partners L.P has a market cap of $532.8 million and is part of the transportation industry. Shares are up 19.1% year to date as of the close of trading on Thursday. TheStreet Ratings rates Capital Product Partners L.P as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 89.60% to $29.23 million when compared to the same quarter last year. In addition, CAPITAL PRODUCT PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of 29.07%.
- The gross profit margin for CAPITAL PRODUCT PARTNERS LP is rather high; currently it is at 68.40%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -91.38% is in-line with the industry average.
- CPLP, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 12.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 3472.5% when compared to the same quarter one year ago, falling from $1.04 million to -$35.01 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CAPITAL PRODUCT PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Capital Product Partners L.P Ratings Report.