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 4 stocks with substantial yields, that ultimately, we have rated "Hold."KKR Financial Holdings (NYSE: KFN) shares currently have a dividend yield of 7.80%. KKR Financial Holdings LLC, together with its subsidiaries, operates as a specialty finance company with expertise in a range of asset classes. The company has a P/E ratio of 5.81. The average volume for KKR Financial Holdings has been 727,500 shares per day over the past 30 days. KKR Financial Holdings has a market cap of $2.2 billion and is part of the real estate industry. Shares are up 1.8% year to date as of the close of trading on Monday. TheStreet Ratings rates KKR Financial Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 17.2%. 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 KKR FINANCIAL HOLDINGS LLC is currently very high, coming in at 77.40%. It has increased significantly from the same period last year. Along with this, the net profit margin of 40.33% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Financial Services industry average. The net income increased by 11.7% when compared to the same quarter one year prior, going from $88.05 million to $98.34 million.
- Net operating cash flow has decreased to $39.68 million or 11.26% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 2.43 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full KKR Financial Holdings Ratings Report.
- DOM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 74.66, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DOMINION RES BLACK WARRIOR is currently very high, coming in at 100.00%. DOM has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, DOM's net profit margin of 81.35% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 8.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- DOMINION RES BLACK WARRIOR's earnings per share declined by 5.5% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, DOMINION RES BLACK WARRIOR reported lower earnings of $0.54 versus $0.93 in the prior year.
- 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 10.2% when compared to the same quarter one year ago, dropping from $1.44 million to $1.30 million.
- You can view the full Dominion Resources Black Warrior Ratings Report.
- NTE's very impressive revenue growth greatly exceeded the industry average of 0.6%. Since the same quarter one year prior, revenues leaped by 102.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NTE's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NTE has a quick ratio of 1.95, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 gross profit margin for NAM TAI ELECTRONIC is currently extremely low, coming in at 9.04%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.80% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$4.41 million or 325.97% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Nam Tai Electronics 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 14.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 33.4% when compared to the same quarter one year prior, rising from -$50.33 million to -$33.51 million.
- EAGLE ROCK ENERGY PARTNRS LP has improved earnings per share by 42.5% 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, EAGLE ROCK ENERGY PARTNRS LP swung to a loss, reporting -$1.11 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$1.11).
- The debt-to-equity ratio of 1.25 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, EROC maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
- 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, EAGLE ROCK ENERGY PARTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Eagle Rock Energy Partners Ratings Report.
- Our dividend calendar.