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 "Buy." Capital Product Partners L.P (NASDAQ: CPLP) shares currently have a dividend yield of 10.10%. Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The average volume for Capital Product Partners L.P has been 324,900 shares per day over the past 30 days. Capital Product Partners L.P has a market cap of $863.2 million and is part of the transportation industry. Shares are up 39.5% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Capital Product Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.2%. Since the same quarter one year prior, revenues rose by 10.4%. 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 1066.7% when compared to the same quarter one year prior, rising from $3.37 million to $39.32 million.
- Net operating cash flow has significantly increased by 335.73% to $62.58 million when compared to the same quarter last year. In addition, CAPITAL PRODUCT PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -18.16%.
- The gross profit margin for CAPITAL PRODUCT PARTNERS LP is rather high; currently it is at 65.02%. Regardless of CPLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CPLP's net profit margin of 94.13% significantly outperformed against the industry.
- CPLP's debt-to-equity ratio of 0.76 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CPLP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.80 is high and demonstrates strong liquidity.
- You can view the full Capital Product Partners L.P Ratings Report.
- BPT 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 2.65, which clearly demonstrates the ability to cover short-term cash needs.
- 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, BP PRUDHOE BAY ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.66% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.2%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 8.0% when compared to the same quarter one year ago, dropping from $53.83 million to $49.55 million.
- You can view the full BP Prudhoe Bay Royalty Ratings Report.
- The revenue growth came in higher than the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 33.1%. 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 -$15.76 million or 47.66% when compared to the same quarter last year. In addition, NEW MOUNTAIN FINANCE CORP has also vastly surpassed the industry average cash flow growth rate of -68.98%.
- The gross profit margin for NEW MOUNTAIN FINANCE CORP is rather high; currently it is at 58.05%. Regardless of NMFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NMFC's net profit margin of 97.01% 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 Capital Markets industry and the overall market on the basis of return on equity, NEW MOUNTAIN FINANCE CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full New Mountain Finance Ratings Report.
- Our dividend calendar.