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 "Buy." ONEOK Partners L.P (NYSE: OKS) shares currently have a dividend yield of 5.00%. ONEOK Partners, L.P. engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates in three segments: Natural Gas Gathering and Processing, Natural Gas Pipelines, and Natural Gas Liquids. The company has a P/E ratio of 18.57. Currently there are 3 analysts that rate ONEOK Partners L.P a buy, 1 analyst rates it a sell, and 9 rate it a hold. The average volume for ONEOK Partners L.P has been 496,400 shares per day over the past 30 days. ONEOK Partners L.P has a market cap of $8.3 billion and is part of the energy industry. Shares are up 4.7% year to date as of the close of trading on Friday. TheStreet Ratings rates ONEOK Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- OKS, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, OKS 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- 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 on the basis of return on equity, ONEOK PARTNERS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for ONEOK PARTNERS -LP is currently extremely low, coming in at 9.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.21% trails that of the industry average.
- You can view the full ONEOK Partners L.P Ratings Report.