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 5 stocks with substantial yields, that ultimately, we have rated "Hold." Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 7.90%. Permian Basin Royalty Trust owns overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 17.83. The average volume for Permian Basin Royalty has been 97,900 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $631.5 million and is part of the energy industry. Shares are up 9.5% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Permian Basin Royalty as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- PBT 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.22, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 95.21% significantly outperformed against the industry.
- PBT, with its decline in revenue, underperformed when compared the industry average of 6.6%. Since the same quarter one year prior, revenues fell by 30.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of PERMIAN BASIN ROYALTY TRUST has not done very well: it is down 11.87% 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- PERMIAN BASIN ROYALTY TRUST's earnings per share declined by 32.4% 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, PERMIAN BASIN ROYALTY TRUST reported lower earnings of $1.16 versus $1.36 in the prior year.
- You can view the full Permian Basin Royalty Ratings Report.
- The revenue growth came in higher than the industry average of 6.6%. Since the same quarter one year prior, revenues rose by 22.7%. 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 slightly increased to $25.61 million or 9.08% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -15.97%.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 29.5% when compared to the same quarter one year ago, falling from $7.81 million to $5.51 million.
- The debt-to-equity ratio of 1.49 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, PVR maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
- You can view the full PVR Partners Ratings Report.
- MCC's very impressive revenue growth greatly exceeded the industry average of 12.7%. Since the same quarter one year prior, revenues leaped by 92.5%. 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.
- MEDLEY CAPITAL CORP 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MEDLEY CAPITAL CORP increased its bottom line by earning $1.24 versus $0.55 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $1.24).
- 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 Capital Markets industry. The net income has significantly decreased by 34.8% when compared to the same quarter one year ago, falling from $4.84 million to $3.16 million.
- 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. When compared to other companies in the Capital Markets industry and the overall market, MEDLEY CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Medley Capital Ratings Report.
- RAS's revenue growth has slightly outpaced the industry average of 10.7%. Since the same quarter one year prior, revenues rose by 20.2%. 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.
- Compared to its closing price of one year ago, RAS's share price has jumped by 31.38%, 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.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 1606.9% when compared to the same quarter one year ago, falling from -$3.53 million to -$60.29 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Rait Financial Ratings Report.
- UAN's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 9.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- UAN's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.70, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for CVR PARTNERS LP is rather high; currently it is at 54.98%. Regardless of UAN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UAN's net profit margin of 39.89% significantly outperformed against the industry.
- UAN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 28.61%, which is also worse than the performance of the S&P 500 Index. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Net operating cash flow has decreased to $17.14 million or 34.21% 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 CVR Partners Ratings Report.
- Our dividend calendar.