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." Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.60%. Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America. The average volume for Niska Gas Storage Partners has been 112,500 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $504.6 million and is part of the utilities industry. Shares are up 34.2% year to date as of the close of trading on Friday. TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, increase in stock price during the past year and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally higher debt management risk. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 383.19% to $73.07 million when compared to the same quarter last year. In addition, NISKA GAS STORAGE PARTNERS has also vastly surpassed the industry average cash flow growth rate of -25.59%.
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The debt-to-equity ratio of 1.21 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NKA maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
- 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 108.2% when compared to the same quarter one year ago, falling from $15.64 million to -$1.28 million.
- You can view the full Niska Gas Storage Partners Ratings Report.
- STON's revenue growth trails the industry average of 26.3%. Since the same quarter one year prior, revenues slightly increased by 0.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for STONEMOR PARTNERS LP is rather high; currently it is at 52.29%. Regardless of STON's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STON's net profit margin of -3.69% significantly underperformed when compared to the industry average.
- STONEMOR PARTNERS LP 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 reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, STONEMOR PARTNERS LP continued to lose money by earning -$0.16 versus -$0.53 in the prior year. For the next year, the market is expecting a contraction of 81.3% in earnings (-$0.29 versus -$0.16).
- 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 Diversified Consumer Services industry and the overall market, STONEMOR PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Diversified Consumer Services industry. The net income has significantly decreased by 208.4% when compared to the same quarter one year ago, falling from $2.03 million to -$2.20 million.
- You can view the full Stonemor Partners Ratings Report.
- The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 36.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- GSJK's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.
- 43.49% is the gross profit margin for COMPRESSCO PARTNERS LP which we consider to be strong. Regardless of GSJK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GSJK's net profit margin of 14.75% compares favorably to the industry average.
- 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. When compared to other companies in the Energy Equipment & Services industry and the overall market, COMPRESSCO PARTNERS LP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Compressco Partners Ratings Report.
- Our dividend calendar.