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 9.60%. Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America. The company has a P/E ratio of 112.00. The average volume for Niska Gas Storage Partners has been 57,500 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $508.2 million and is part of the utilities industry. Shares are up 33.8% year-to-date as of the close of trading on Wednesday. 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, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- NKA's very impressive revenue growth greatly exceeded the industry average of 5.4%. Since the same quarter one year prior, revenues leaped by 50.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 49.0% when compared to the same quarter one year prior, rising from -$15.40 million to -$7.84 million.
- The gross profit margin for NISKA GAS STORAGE PARTNERS is rather high; currently it is at 50.11%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -21.27% is in-line with the industry average.
- The debt-to-equity ratio of 1.24 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.35, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has significantly decreased to -$59.49 million or 334.01% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Niska Gas Storage Partners Ratings Report.