Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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 7.60%. Suburban Propane Partners, L.P., through its subsidiaries, is engaged in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 34.34. The average volume for Suburban Propane Partners has been 135,300 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 down 1.4% 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 impressive record of earnings per share growth, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and unimpressive growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. 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.
- SUBURBAN PROPANE PRTNRS -LP has improved earnings per share by 18.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SUBURBAN PROPANE PRTNRS -LP increased its bottom line by earning $1.44 versus $0.48 in the prior year. This year, the market expects an improvement in earnings ($2.17 versus $1.44).
- Even though the current debt-to-equity ratio is 1.10, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.86 is weak.
- The gross profit margin for SUBURBAN PROPANE PRTNRS -LP is currently extremely low, coming in at 6.27%. Regardless of SPH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SPH's net profit margin of -25.90% significantly underperformed when compared to the industry average.
- Net operating cash flow has significantly decreased to $13.84 million or 63.31% 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 Suburban Propane Partners Ratings Report.
- LRE's very impressive revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues leaped by 111.8%. Growth in the company's revenue appears to have helped boost the 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 101.8% when compared to the same quarter one year prior, rising from -$15.28 million to $0.28 million.
- LRR ENERGY LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LRR ENERGY LP reported lower earnings of $0.00 versus $2.42 in the prior year. This year, the market expects an increase in earnings to $0.82 from $0.00.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LRR ENERGY LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- In its most recent trading session, LRE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full LRR Energy Ratings Report.
- The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 20.8%. 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.
- This stock's share value has moved by only 14.08% over the past year. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- UMH PROPERTIES INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, UMH PROPERTIES INC reported lower earnings of $0.11 versus $0.14 in the prior year.
- The gross profit margin for UMH PROPERTIES INC is rather low; currently it is at 16.46%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.48% significantly trails the industry average.
- Net operating cash flow has significantly decreased to -$0.06 million or 108.80% 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 UMH Properties Ratings Report.
- The revenue growth came in higher than the industry average of 8.8%. Since the same quarter one year prior, revenues slightly increased by 9.1%. 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.
- The gross profit margin for MCG CAPITAL CORP is currently very high, coming in at 80.80%. It has increased significantly from the same period last year. Along with this, the net profit margin of 24.97% is above that of the industry average.
- Net operating cash flow has significantly increased by 272.20% to $63.01 million when compared to the same quarter last year. Despite an increase in cash flow, MCG CAPITAL CORP's average is still marginally south of the industry average growth rate of 273.60%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, MCGC has underperformed the S&P 500 Index, declining 5.77% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has decreased by 22.9% when compared to the same quarter one year ago, dropping from $4.27 million to $3.29 million.
- You can view the full MCG Capital Corporation Ratings Report.
- Our dividend calendar.