Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."NuStar Energy L.P (NYSE: NS) shares currently have a dividend yield of 8.10%. NuStar Energy L.P. engages in the terminalling, storage, and transportation of petroleum products primarily in the United States and the Netherlands. The company operates in three segments: Storage, Transportation, and Asphalt and Fuels Marketing. The average volume for NuStar Energy L.P has been 387,700 shares per day over the past 30 days. NuStar Energy L.P has a market cap of $4.2 billion and is part of the energy industry. Shares are up 28.5% year to date as of the close of trading on Tuesday. TheStreet Ratings rates NuStar Energy L.P as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 469.09% to $27.32 million when compared to the same quarter last year. In addition, NUSTAR ENERGY LP has also vastly surpassed the industry average cash flow growth rate of 20.25%.
- The revenue fell significantly faster than the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 48.9%. 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 135.2% when compared to the same quarter one year ago, falling from $30.20 million to -$10.62 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, NUSTAR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full NuStar Energy L.P Ratings Report.
- Net operating cash flow has increased to $392.19 million or 30.71% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 13.59%.
- 44.90% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last 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. When compared to other companies in the Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity is below that of both the industry average and the S&P 500.
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 41.1% when compared to the same quarter one year ago, falling from $42.25 million to $24.88 million.
- You can view the full Frontier Communications Corp Class B Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 92.2% when compared to the same quarter one year prior, rising from $60.63 million to $116.54 million.
- Net operating cash flow has slightly increased to $533.19 million or 6.88% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.20%.
- 45.20% is the gross profit margin for CABLEVISION SYS CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.00% trails the industry average.
- CABLEVISION SYS CORP 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CABLEVISION SYS CORP reported lower earnings of $0.13 versus $0.84 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.13).
- In its most recent trading session, CVC 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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- You can view the full Cablevision Systems Ratings Report.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market, BANK OF MONTREAL's return on equity exceeds that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The gross profit margin for BANK OF MONTREAL is currently very high, coming in at 83.90%. Regardless of BMO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BMO's net profit margin of 19.64% compares favorably to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 5.5% when compared to the same quarter one year ago, dropping from $1,090.00 million to $1,030.00 million.
- Net operating cash flow has significantly decreased to $10,656.00 million or 55.67% 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 Bank of Montreal Ratings Report.
- Our dividend calendar.