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." Crestwood Midstream Partners (NYSE: CMLP) shares currently have a dividend yield of 7.70%. Crestwood Midstream Partners LP primarily engages in the gathering, processing, treating, compressing, transporting, and selling natural gas in the United States. The company operates in four segments: Barnett, Fayetteville, Granite Wash, and Marcellus. The company has a P/E ratio of 120.32. The average volume for Crestwood Midstream Partners has been 130,000 shares per day over the past 30 days. Crestwood Midstream Partners has a market cap of $1.4 billion and is part of the energy industry. Shares are up 21.9% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Crestwood Midstream Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and increase in stock price during the past year. 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 greatly exceeded the industry average of 6.6%. Since the same quarter one year prior, revenues rose by 28.7%. 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 increased to $23.50 million or 35.17% when compared to the same quarter last year. In addition, CRESTWOOD MIDSTREAM PTNRS LP has also vastly surpassed the industry average cash flow growth rate of -15.97%.
- 47.95% is the gross profit margin for CRESTWOOD MIDSTREAM PTNRS LP which we consider to be strong. Regardless of CMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CMLP's net profit margin of 6.84% compares favorably to the industry average.
- CRESTWOOD MIDSTREAM PTNRS 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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CRESTWOOD MIDSTREAM PTNRS LP reported lower earnings of $0.37 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.37).
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Crestwood Midstream Partners Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 19.8%. Since the same quarter one year prior, revenues rose by 17.4%. 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 COLLECTORS UNIVERSE INC is rather high; currently it is at 63.46%. It has increased from the same quarter the previous year.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- COLLECTORS UNIVERSE INC's earnings per share declined by 19.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, COLLECTORS UNIVERSE INC reported lower earnings of $0.71 versus $0.86 in the prior year.
- You can view the full Collectors Universe Ratings Report.
- NMFC's very impressive revenue growth greatly exceeded the industry average of 12.7%. Since the same quarter one year prior, revenues leaped by 73.2%. 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 NEW MOUNTAIN FINANCE CORP is currently very high, coming in at 75.84%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 42.16% significantly outperformed against 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. 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.
- NEW MOUNTAIN FINANCE CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, NEW MOUNTAIN FINANCE CORP increased its bottom line by earning $2.20 versus $1.02 in the prior year. For the next year, the market is expecting a contraction of 30.9% in earnings ($1.52 versus $2.20).
- You can view the full New Mountain Finance Ratings Report.
- Our dividend calendar.