TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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 10.50%. 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 6.68. The average volume for Ship Finance International has been 715,400 shares per day over the past 30 days. Ship Finance International has a market cap of $1.3 billion and is part of the transportation industry. Shares are down 10.8% year to date as of the close of trading on Wednesday. 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 a generally disappointing performance in the stock itself. 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 -25.63%.
- The gross profit margin for SHIP FINANCE INTL LTD is rather high; currently it is at 64.15%. 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.
- 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 54.58%. 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.
- 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 10.7%. 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).
- In its most recent trading session, MCEP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.