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 "Buy." ONEOK Partners L.P (NYSE: OKS) shares currently have a dividend yield of 5.70%. ONEOK Partners, L.P. engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates in three segments: Natural Gas Gathering and Processing, Natural Gas Pipelines, and Natural Gas Liquids. The company has a P/E ratio of 19.66. The average volume for ONEOK Partners L.P has been 482,000 shares per day over the past 30 days. ONEOK Partners L.P has a market cap of $7.4 billion and is part of the energy industry. Shares are down 7.3% year to date as of the close of trading on Monday. TheStreet Ratings rates ONEOK Partners L.P as a buy. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of ONEOK PARTNERS -LP has not done very well: it is down 5.42% 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ONEOK PARTNERS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has decreased to $181.44 million or 17.21% when compared to the same quarter last year. Despite a decrease in cash flow of 17.21%, ONEOK PARTNERS -LP is in line with the industry average cash flow growth rate of -25.53%.
- You can view the full ONEOK Partners L.P Ratings Report.