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." Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 8.50%. Mesa Royalty Trust holds net overriding royalty interests in various oil and gas producing properties in the United States. It has interests in properties that are located in the Hugoton field of Kansas; the San Juan Basin field of New Mexico and Colorado; and the Yellow Creek field of Wyoming. The company has a P/E ratio of 12.83. The average volume for Mesa Royalty has been 4,900 shares per day over the past 30 days. Mesa Royalty has a market cap of $46.2 million and is part of the financial services industry. Shares are up 31.5% year to date as of the close of trading on Monday. TheStreet Ratings rates Mesa Royalty as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. 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 a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- MTR 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 7.61, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for MESA ROYALTY TRUST is currently very high, coming in at 100.00%. MTR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MTR's net profit margin of 97.07% significantly outperformed against the industry.
- The revenue fell significantly faster than the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 47.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- MESA ROYALTY TRUST's earnings per share declined by 38.4% 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, MESA ROYALTY TRUST reported lower earnings of $1.93 versus $2.96 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 48.2% when compared to the same quarter one year ago, falling from $1.60 million to $0.83 million.
- You can view the full Mesa Royalty Ratings Report.
- Powered by its strong earnings growth of 104.88% and other important driving factors, this stock has surged by 49.84% 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 (-$0.55 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.
- 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 6.0%. 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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Building Products industry average. 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.
- The revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 41.6%. 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.
- 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. 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.
- Net operating cash flow has remained constant at $34.50 million with no significant change when compared to the same quarter last year. Despite stable cash flow, EAGLE ROCK ENERGY PARTNRS LP's cash flow growth rate is still lower than the industry average growth rate of 20.63%.
- 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, EAGLE ROCK ENERGY PARTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for EAGLE ROCK ENERGY PARTNRS LP is currently extremely low, coming in at 7.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -17.65% is significantly below that of the industry average.
- You can view the full Eagle Rock Energy Partners Ratings Report.
- Our dividend calendar.