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 "Sell." Atlas Resource Partners (NYSE: ARP) shares currently have a dividend yield of 10.40%. Atlas Resource Partners, L.P. engages in the production of natural gas, crude oil, and natural gas liquids in basins across the United States. The company operates through three segments: Gas and Oil Production, Well Construction and Completion, and Other Partnership Management. The average volume for Atlas Resource Partners has been 679,900 shares per day over the past 30 days. Atlas Resource Partners has a market cap of $1.2 billion and is part of the energy industry. Shares are down 6.8% year to date as of the close of trading on Thursday. TheStreet Ratings rates Atlas Resource Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has significantly decreased to -$31.26 million or 91.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- ARP has underperformed the S&P 500 Index, declining 16.24% from its price level of one year ago. 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.
- ARP's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.71 is somewhat weak and could be cause for future problems.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ATLAS RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- 42.51% is the gross profit margin for ATLAS RESOURCE PARTNERS LP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -7.41% is in-line with the industry average.
- You can view the full Atlas Resource Partners Ratings Report.
- CYS INVESTMENTS INC 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, CYS INVESTMENTS INC reported lower earnings of $2.75 versus $3.63 in the prior year. For the next year, the market is expecting a contraction of 77.7% in earnings ($0.61 versus $2.75).
- 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 491.6% when compared to the same quarter one year ago, falling from $101.71 million to -$398.29 million.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, CYS INVESTMENTS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 366.66% compared to the year-earlier quarter. 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.
- The gross profit margin for CYS INVESTMENTS INC is currently very high, coming in at 93.05%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -488.38% is in-line with the industry average.
- You can view the full CYS Investments Ratings Report.
- ENERPLUS CORP's earnings per share declined by 49.0% 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, ENERPLUS CORP swung to a loss, reporting -$0.79 versus $0.62 in the prior year.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 47.5% when compared to the same quarter one year ago, falling from $100.26 million to $52.62 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENERPLUS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, ERF has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- ERF, with its decline in revenue, slightly underperformed the industry average of 6.6%. Since the same quarter one year prior, revenues fell by 11.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Enerplus Ratings Report.
- The gross profit margin for OAKTREE CAPITAL GROUP LLC is rather high; currently it is at 55.09%. Regardless of OAK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.95% trails the industry average.
- Net operating cash flow has significantly increased by 234.82% to $2,216.67 million when compared to the same quarter last year. In addition, OAKTREE CAPITAL GROUP LLC has also vastly surpassed the industry average cash flow growth rate of 8.52%.
- 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 Capital Markets industry and the overall market, OAKTREE CAPITAL GROUP LLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- This stock has increased by 36.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in OAK do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- OAKTREE CAPITAL GROUP LLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, OAKTREE CAPITAL GROUP LLC turned its bottom line around by earning $3.56 versus -$2.82 in the prior year. This year, the market expects an improvement in earnings ($5.78 versus $3.56).
- You can view the full Oaktree Capital Group Ratings Report.
- Our dividend calendar.