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 "Buy." Navios Maritime Partners L.P (NYSE: NMM) shares currently have a dividend yield of 10.80%. Navios Maritime Partners L.P. engages in the ownership and operation of dry cargo vessels in Europe, Asia, North America, and Australia. The company has a P/E ratio of 11.91. The average volume for Navios Maritime Partners L.P has been 500,400 shares per day over the past 30 days. Navios Maritime Partners L.P has a market cap of $1.2 billion and is part of the transportation industry. Shares are up 33.9% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Navios Maritime Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The gross profit margin for NAVIOS MARITIME PARTNERS LP is currently very high, coming in at 91.87%. Regardless of NMM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NMM's net profit margin of 28.17% significantly outperformed against the industry.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Despite currently having a low debt-to-equity ratio of 0.47, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.74 is very high and demonstrates very strong liquidity.
- NMM, with its decline in revenue, underperformed when compared the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 16.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- NAVIOS MARITIME PARTNERS LP's earnings per share declined by 45.9% in the most recent quarter compared to 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, NAVIOS MARITIME PARTNERS LP increased its bottom line by earning $1.64 versus $1.19 in the prior year. For the next year, the market is expecting a contraction of 49.4% in earnings ($0.83 versus $1.64).
- You can view the full Navios Maritime Partners L.P Ratings Report.