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." Educational Development Corporation (NASDAQ: EDUC) shares currently have a dividend yield of 9.30%. Educational Development Corporation operates as a trade publisher of the line of children's books in the United States. The company has a P/E ratio of 17.16. The average volume for Educational Development Corporation has been 6,300 shares per day over the past 30 days. Educational Development Corporation has a market cap of $13.6 million and is part of the media industry. Shares are down 9.7% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Educational Development Corporation as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, 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 feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- EDUC's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
- The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 54.60%. Regardless of EDUC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.79% trails the industry average.
- 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. In comparison to the other companies in the Distributors industry and the overall market, EDUCATIONAL DEVELOPMENT CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to -$0.25 million or 70.83% 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.
- You can view the full Educational Development Corporation Ratings Report.
- 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 8.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.56, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.92 is weak.
- The gross profit margin for RHINO RESOURCE PARTNERS LP is currently lower than what is desirable, coming in at 27.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.23% is significantly below that of the industry average.
- Net operating cash flow has decreased to $10.60 million or 37.83% 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.
- You can view the full Rhino Resource Partners Ratings Report.
- NRT 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for NORTH EUROPEAN OIL RTY TR is currently very high, coming in at 100.00%. NRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NRT's net profit margin of 96.61% significantly outperformed against the industry.
- 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 6.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- NORTH EUROPEAN OIL RTY TR's earnings per share declined by 5.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, NORTH EUROPEAN OIL RTY TR reported lower earnings of $2.46 versus $2.63 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 the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from $6.26 million to $5.84 million.
- You can view the full North European Oil Royalty Ratings Report.
- When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- MCEP's very impressive revenue growth greatly exceeded the industry average of 10.6%. Since the same quarter one year prior, revenues leaped by 79.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MID-CON ENERGY 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, MID-CON ENERGY PARTNERS -LP increased its bottom line by earning $1.63 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($2.03 versus $1.63).
- 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.
- The debt-to-equity ratio of 1.12 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, MCEP's quick ratio is somewhat strong at 1.10, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Mid-Con Energy Partners Ratings Report.
- Our dividend calendar.