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 5 stocks with substantial yields, that ultimately, we have rated "Hold." Inergy L.P (NYSE: NRGY) shares currently have a dividend yield of 7.20%. Inergy, L.P., an integrated energy midstream master limited partnership, engages in the storage and transportation of natural gas and natural gas liquids (NGL) in the United States and Canada. The company has a P/E ratio of 5.97 The average volume for Inergy L.P has been 780,200 shares per day over the past 30 days Inergy L.P has a market cap of $2.7 billion and is part of the energy industry Shares are down 11.9% year to date as of the close of trading on Friday TheStreet Ratings rates Inergy L.P as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, INERGY LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- NRGY, with its decline in revenue, underperformed when compared the industry average of 13.3%. Since the same quarter one year prior, revenues fell by 32.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has decreased to $121.00 million or 29.36% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, INERGY LP has marginally lower results.
- 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 114.3% when compared to the same quarter one year ago, falling from $40.70 million to -$5.80 million.
- You can view the full Inergy L.P Ratings Report.