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 3 stocks with substantial yields, that ultimately, we have rated "Hold." NuStar GP Holdings (NYSE: NSH) shares currently have a dividend yield of 7.10%. NuStar GP Holdings, LLC owns general partner and limited partner interests in NuStar Energy L.P. that engages in the terminalling and storage of petroleum products, transportation of petroleum products and anhydrous ammonia, and petroleum refining and marketing. The company has a P/E ratio of 617.40. Currently there is 1 analyst that rates NuStar GP Holdings a buy, 2 analysts rate it a sell, and 3 rate it a hold. The average volume for NuStar GP Holdings has been 122,700 shares per day over the past 30 days. NuStar GP Holdings has a market cap of $1.3 billion and is part of the energy industry. Shares are up 11.1% year to date as of the close of trading on Friday. TheStreet Ratings rates NuStar GP Holdings as a hold. The company's strengths can be seen in multiple areas, such as its 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 a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for NUSTAR GP HOLDINGS LLC is currently very high, coming in at 100.00%. NSH has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NSH's net profit margin of 74.35% significantly outperformed against the industry.
- NSH's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.35 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The revenue fell significantly faster than the industry average of 2.9%. Since the same quarter one year prior, revenues fell by 45.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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, NUSTAR GP HOLDINGS LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$2.73 million or 123.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full NuStar GP Holdings Ratings Report.
- Powered by its strong earnings growth of 104.88% and other important driving factors, this stock has surged by 36.88% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 104.9% when compared to the same quarter one year prior, rising from -$213.63 million to $10.42 million.
- NISKA GAS STORAGE PARTNERS 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, NISKA GAS STORAGE PARTNERS swung to a loss, reporting -$2.38 versus $0.84 in the prior year. This year, the market expects an improvement in earnings (-$0.51 versus -$2.38).
- Net operating cash flow has decreased to $59.82 million or 47.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Niska Gas Storage Partners Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 1357.1% when compared to the same quarter one year prior, rising from $1.70 million to $24.79 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 7.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ELLINGTON FINANCIAL LLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ELLINGTON FINANCIAL LLC increased its bottom line by earning $5.32 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 43.8% in earnings ($2.99 versus $5.32).
- The gross profit margin for ELLINGTON FINANCIAL LLC is currently lower than what is desirable, coming in at 34.30%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 148.82% has significantly outperformed against the industry average.
- You can view the full Ellington Financial Ratings Report.
- Our dividend calendar.