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 "Hold." Hi-Crush Partners (NYSE: HCLP) shares currently have a dividend yield of 7.20%. Hi-Crush Partners LP operates as a producer of monocrystalline sand. Monocrystalline sand is a mineral that is used as a proppant to enhance the recovery rates of hydrocarbons from oil and natural gas wells. The average volume for Hi-Crush Partners has been 141,600 shares per day over the past 30 days. Hi-Crush Partners has a market cap of $401.5 million and is part of the metals & mining industry. Shares are up 74.8% year to date as of the close of trading on Friday. TheStreet Ratings rates Hi-Crush Partners as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and solid stock price performance. 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:
- Compared to other companies in the Metals & Mining industry and the overall market, HI-CRUSH PARTNERS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 31.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The gross profit margin for HI-CRUSH PARTNERS LP is rather high; currently it is at 59.92%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, HCLP's net profit margin of 54.17% significantly outperformed against the industry.
- HCLP's debt-to-equity ratio of 0.98 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.33 is very high and demonstrates very strong liquidity.
- You can view the full Hi-Crush Partners Ratings Report.