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." Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.50%. Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America. The company has a P/E ratio of 105.00. The average volume for Niska Gas Storage Partners has been 66,300 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $507.0 million and is part of the utilities industry. Shares are up 34.9% year to date as of the close of trading on Thursday. TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet. Highlights from the ratings report include:
- NKA's very impressive revenue growth greatly exceeded the industry average of 6.5%. Since the same quarter one year prior, revenues leaped by 193.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NISKA GAS STORAGE PARTNERS 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, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.63 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus -$0.63).
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- 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, NISKA GAS STORAGE PARTNERS's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.13 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, NKA has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Niska Gas Storage Partners Ratings Report.