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 "Hold." Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 10.20%. StoneMor Partners L.P., together with its subsidiaries, engages in the ownership and operation of cemeteries in the United States. It operates through Cemetery Operations Southeast, Cemetery Operations Northeast, Cemetery Operations West, and Funeral Homes segments. The average volume for Stonemor Partners has been 95,100 shares per day over the past 30 days. Stonemor Partners has a market cap of $503.9 million and is part of the diversified services industry. Shares are up 13.3% year to date as of the close of trading on Friday. TheStreet Ratings rates Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good. Highlights from the ratings report include:
- Since the same quarter one year prior, revenues slightly increased by 1.5%. 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.
- Net operating cash flow has significantly increased by 60.13% to $9.62 million when compared to the same quarter last year.
- The net income has significantly decreased by 444.4% when compared to the same quarter one year ago, falling from -$2.17 million to -$11.81 million.
- 46.92% is the gross profit margin for STONEMOR PARTNERS LP which we consider to be strong. Regardless of STON's high profit margin, it has managed to decrease from the same period last year.
- STONEMOR PARTNERS 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. 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, STONEMOR PARTNERS LP continued to lose money by earning -$0.16 versus -$0.53 in the prior year. For the next year, the market is expecting a contraction of 418.8% in earnings (-$0.83 versus -$0.16).
- You can view the full Stonemor Partners Ratings Report.