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." 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 4.15. The average volume for Inergy L.P has been 740,400 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 10.8% 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, reasonable valuation levels 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 10.7%. 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.
- The gross profit margin for INERGY LP is rather low; currently it is at 18.63%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -1.28% is significantly below that of the industry average.
- 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.
- You can view the full Inergy L.P Ratings Report.
- Compared to its closing price of one year ago, VCI's share price has jumped by 38.06%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- VALASSIS COMMUNICATIONS INC's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VALASSIS COMMUNICATIONS INC increased its bottom line by earning $2.86 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($3.11 versus $2.86).
- 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 Media industry. The net income has decreased by 18.0% when compared to the same quarter one year ago, dropping from $26.42 million to $21.67 million.
- The gross profit margin for VALASSIS COMMUNICATIONS INC is currently lower than what is desirable, coming in at 27.21%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.49% significantly trails the industry average.
- You can view the full Valassis Communications Ratings Report.
- The revenue growth came in higher than the industry average of 10.7%. Since the same quarter one year prior, revenues rose by 18.8%. 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.
- Net operating cash flow has increased to $58.24 million or 26.40% when compared to the same quarter last year. In addition, VANGUARD NATURAL RESOURCES has also vastly surpassed the industry average cash flow growth rate of -25.59%.
- The gross profit margin for VANGUARD NATURAL RESOURCES is rather high; currently it is at 50.28%. Regardless of VNR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VNR's net profit margin of -40.08% significantly underperformed when compared to the industry average.
- The debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, VNR has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, VANGUARD NATURAL RESOURCES's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Vanguard Natural Resources Ratings Report.
- SAN's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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.
- 46.60% is the gross profit margin for BANCO SANTANDER-CHILE which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SAN's net profit margin of 16.80% compares favorably to 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 Commercial Banks industry and the overall market, BANCO SANTANDER-CHILE's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The share price of BANCO SANTANDER-CHILE has not done very well: it is down 6.64% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Banco Santander Ratings Report.
- Our dividend calendar.