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." LRR Energy (NYSE: LRE) shares currently have a dividend yield of 12.60%. LRR Energy, L.P., through its subsidiary, LRE Operating, LLC, engages in the acquisition, exploitation, development, and operation of oil and natural gas properties in North America. The average volume for LRR Energy has been 244,200 shares per day over the past 30 days. LRR Energy has a market cap of $297.6 million and is part of the energy industry. Shares are down 11% year to date as of the close of trading on Friday. TheStreet Ratings rates LRR Energy 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 and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- LRE's debt-to-equity ratio of 0.86 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.69 is very high and demonstrates very strong liquidity.
- 50.00% is the gross profit margin for LRR ENERGY LP 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, LRE's net profit margin of -47.27% significantly underperformed when compared to the industry average.
- Net operating cash flow has decreased to $9.85 million or 36.58% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- 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, LRR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full LRR Energy Ratings Report.
- NTLS's revenue growth has slightly outpaced the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, NTELOS HOLDINGS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- NTELOS HOLDINGS CORP's earnings per share declined by 32.4% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NTELOS HOLDINGS CORP reported lower earnings of $0.87 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.87).
- The share price of NTELOS HOLDINGS CORP has not done very well: it is down 23.06% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for NTELOS HOLDINGS CORP is currently lower than what is desirable, coming in at 30.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.60% trails that of the industry average.
- You can view the full NTELOS Holdings Ratings Report.
- MARPS 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.
- The gross profit margin for MARINE PETROLEUM TRUST is currently very high, coming in at 100.00%. MARPS has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MARPS's net profit margin of 95.41% significantly outperformed against the industry.
- MARINE PETROLEUM TRUST's earnings per share declined by 38.8% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MARINE PETROLEUM TRUST increased its bottom line by earning $1.92 versus $1.59 in the prior year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 38.77% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 38.0% when compared to the same quarter one year ago, falling from $0.97 million to $0.60 million.
- You can view the full Marine Petroleum Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet & Catalog Retail industry. The net income increased by 85.7% when compared to the same quarter one year prior, rising from -$4.48 million to -$0.64 million.
- Net operating cash flow has increased to $22.40 million or 48.60% when compared to the same quarter last year. In addition, NUTRISYSTEM INC has also vastly surpassed the industry average cash flow growth rate of -13.17%.
- NTRI 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.87 is somewhat weak and could be cause for future problems.
- NTRI has underperformed the S&P 500 Index, declining 19.52% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- 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 Internet & Catalog Retail industry and the overall market, NUTRISYSTEM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full NutriSystem Ratings Report.
- Our dividend calendar.