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." Capital Product Partners L.P (NASDAQ: CPLP) shares currently have a dividend yield of 10.30%. Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The average volume for Capital Product Partners L.P has been 217,000 shares per day over the past 30 days. Capital Product Partners L.P has a market cap of $623.7 million and is part of the transportation industry. Shares are up 36.6% year to date as of the close of trading on Friday. TheStreet Ratings rates Capital Product Partners L.P as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- CPLP's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 0.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for CAPITAL PRODUCT PARTNERS LP is rather high; currently it is at 63.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 62.58% significantly outperformed against the industry average.
- 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.
- Net operating cash flow has decreased to $17.88 million or 10.01% when compared to the same quarter last year. Despite a decrease in cash flow CAPITAL PRODUCT PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -23.86%.
- 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, CAPITAL PRODUCT PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Capital Product Partners L.P Ratings Report.