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." Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 9.00%. StoneMor Partners L.P., together with its subsidiaries, engages in the ownership and operation of cemeteries in the southeast, northeast, and west regions of the United States. It offers funeral and cemetery products and services in the death care industry. Currently there is 1 analyst that rates Stonemor Partners a buy, no analysts rate it a sell, and 1 rates it a hold. The average volume for Stonemor Partners has been 107,600 shares per day over the past 30 days. Stonemor Partners has a market cap of $518.6 million and is part of the diversified services industry. Shares are up 26.2% year to date as of the close of trading on Friday. TheStreet Ratings rates Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally higher debt management risk. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 14.2%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 119.61% to $1.10 million when compared to the same quarter last year. In addition, STONEMOR PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -286.02%.
- STONEMOR PARTNERS LP's earnings per share declined by 25.0% 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, STONEMOR PARTNERS LP continued to lose money by earning -$0.16 versus -$0.53 in the prior year. This year, the market expects an improvement in earnings (-$0.12 versus -$0.16).
- The change in net income from the same quarter one year ago has exceeded that of the Diversified Consumer Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 27.2% when compared to the same quarter one year ago, falling from -$3.09 million to -$3.94 million.
- Currently the debt-to-equity ratio of 1.89 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, STON has managed to keep a strong quick ratio of 1.81, which demonstrates the ability to cover short-term cash needs.
- You can view the full Stonemor Partners Ratings Report.
- DOM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 99.35, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DOMINION RES BLACK WARRIOR is currently very high, coming in at 100.00%. DOM has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, DOM's net profit margin of 77.81% significantly outperformed against the industry.
- DOM, with its very weak revenue results, has greatly underperformed against the industry average of 2.9%. Since the same quarter one year prior, revenues plummeted by 53.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- DOMINION RES BLACK WARRIOR has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, DOMINION RES BLACK WARRIOR reported lower earnings of $0.93 versus $1.17 in the prior year.
- 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 59.6% when compared to the same quarter one year ago, falling from $1.92 million to $0.78 million.
- You can view the full Dominion Resources Black Warrior Ratings Report.
- CCCL's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CCCL has a quick ratio of 1.92, which demonstrates the ability of the company to cover short-term liquidity needs.
- CCCL, with its decline in revenue, slightly underperformed the industry average of 5.7%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- CHINA CERAMICS CO LTD's earnings per share declined by 13.4% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CHINA CERAMICS CO LTD reported lower earnings of $2.48 versus $2.93 in the prior year.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Building Products industry average, but is greater than that of the S&P 500. The net income has decreased by 2.5% when compared to the same quarter one year ago, dropping from $12.16 million to $11.85 million.
- You can view the full China Ceramics Ratings Report.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- MCEP's very impressive revenue growth greatly exceeded the industry average of 2.9%. Since the same quarter one year prior, revenues leaped by 269.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has slightly increased to $9.93 million or 3.90% when compared to the same quarter last year. Despite an increase in cash flow, MID-CON ENERGY PARTNERS -LP's cash flow growth rate is still lower than the industry average growth rate of 29.14%.
- In its most recent trading session, MCEP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The debt-to-equity ratio of 1.08 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, MCEP's quick ratio is somewhat strong at 1.46, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Mid-Con Energy Partners Ratings Report.
- Our dividend calendar.