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." Baytex Energy (NYSE: BTE) shares currently have a dividend yield of 7.20%. Baytex Energy Corp., an oil and gas company, engages in the acquisition, development, and production of crude oil and natural gas in the Western Canadian Sedimentary Basin; and the Williston Basin in the United States. The company offers heavy oil, light oil, and natural gas liquids. The company has a P/E ratio of 19.39 The average volume for Baytex Energy has been 212,100 shares per day over the past 30 days Baytex Energy has a market cap of $4.3 billion and is part of the energy industry Shares are down 17.6% year to date as of the close of trading on Tuesday TheStreet Ratings rates Baytex Energy as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 47.10% is the gross profit margin for BAYTEX ENERGY CORP which we consider to be strong. Regardless of BTE'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 4.45% trails the industry average.
- BAYTEX ENERGY CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, BAYTEX ENERGY CORP increased its bottom line by earning $2.14 versus $1.83 in the prior year.
- Net operating cash flow has decreased to $95.17 million or 37.12% 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.
- 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 76.4% when compared to the same quarter one year ago, falling from $42.96 million to $10.15 million.
- You can view the full Baytex Energy Ratings Report.