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 "Hold." Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 8.90%. Ship Finance International Limited, through its subsidiaries, engages in the ownership and operation of vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. The company has a P/E ratio of 7.86. The average volume for Ship Finance International has been 515,800 shares per day over the past 30 days. Ship Finance International has a market cap of $1.5 billion and is part of the transportation industry. Shares are up 2.1% year to date as of the close of trading on Friday. TheStreet Ratings rates Ship Finance International as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 124.51% to $68.00 million when compared to the same quarter last year. In addition, SHIP FINANCE INTL LTD has also vastly surpassed the industry average cash flow growth rate of -25.50%.
- The gross profit margin for SHIP FINANCE INTL LTD is rather high; currently it is at 64.20%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SFL's net profit margin of 49.74% significantly outperformed against the industry.
- 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, SHIP FINANCE INTL LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 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 the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 16.9% when compared to the same quarter one year ago, dropping from $38.95 million to $32.38 million.
- Currently the debt-to-equity ratio of 1.60 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, SFL maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
- You can view the full Ship Finance International 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. Along with this, the company maintains a quick ratio of 3.37, which clearly demonstrates the ability to cover short-term cash needs.
- CCCL, with its very weak revenue results, has greatly underperformed against the industry average of 3.2%. Since the same quarter one year prior, revenues plummeted by 59.4%. 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 Building Products industry. The net income has significantly decreased by 107.6% when compared to the same quarter one year ago, falling from $11.38 million to -$0.87 million.
- The gross profit margin for CHINA CERAMICS CO LTD is currently extremely low, coming in at 14.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -3.60% trails that of the industry average.
- You can view the full China Ceramics Ratings Report.
- The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 36.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 61.11% and other important driving factors, this stock has surged by 49.30% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although GSJK had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- COMPRESSCO PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, COMPRESSCO PARTNERS LP increased its bottom line by earning $1.04 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $1.04).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 64.0% when compared to the same quarter one year prior, rising from $2.77 million to $4.54 million.
- 43.50% is the gross profit margin for COMPRESSCO PARTNERS LP which we consider to be strong. Regardless of GSJK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GSJK's net profit margin of 14.75% compares favorably to the industry average.
- You can view the full Compressco Partners Ratings Report.
- Our dividend calendar.