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." Suburban Propane Partners (NYSE: SPH) shares currently have a dividend yield of 7.70%. Suburban Propane Partners, L.P., through its subsidiaries, engages in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 34.13. The average volume for Suburban Propane Partners has been 120,100 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $2.8 billion and is part of the utilities industry. Shares are up 18.3% year to date as of the close of trading on Friday. TheStreet Ratings rates Suburban Propane Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to its price level of one year ago, SPH is up 16.68% to its most recent closing price of 45.74. Looking ahead, our view is that this company's fundamentals should 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 net income has decreased by 2.5% when compared to the same quarter one year ago, dropping from -$61.60 million to -$63.12 million.
- Net operating cash flow has significantly decreased to $13.84 million or 63.31% when compared to the same quarter last year.
- The gross profit margin for SUBURBAN PROPANE PRTNRS -LP is currently extremely low, coming in at 4.99%. It has decreased from the same quarter the previous year.
- You can view the full Suburban Propane Partners Ratings Report.