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." MarkWest Energy Partners (NYSE: MWE) shares currently have a dividend yield of 5.10%. Markwest Energy Partners, L.P., together with its subsidiaries, engages in the gathering, processing, and transportation of natural gas the United States. The company has a P/E ratio of 136.29. The average volume for MarkWest Energy Partners has been 920,400 shares per day over the past 30 days. MarkWest Energy Partners has a market cap of $10.0 billion and is part of the energy industry. Shares are up 1.3% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates MarkWest Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 49.9%. 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.
- Net operating cash flow has increased to $153.06 million or 14.84% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.96%.
- The gross profit margin for MARKWEST ENERGY PARTNERS LP is currently lower than what is desirable, coming in at 30.61%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.61% is significantly below that of the industry average.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 64.6% when compared to the same quarter one year ago, falling from -$14.34 million to -$23.60 million.
- You can view the full MarkWest Energy Partners Ratings Report.
- Net operating cash flow has slightly increased to $179.68 million or 6.53% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.67%.
- 39.06% is the gross profit margin for SOC QUIMICA Y MINERA DE CHI which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SQM's net profit margin of 26.65% significantly outperformed against the industry.
- SQM's debt-to-equity ratio of 0.79 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. Despite the fact that SQM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.66 is high and demonstrates strong liquidity.
- Looking at the price performance of SQM's shares over the past 12 months, there is not much good news to report: the stock is down 56.65%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 Chemicals industry. The net income has decreased by 15.9% when compared to the same quarter one year ago, dropping from $165.18 million to $138.91 million.
- You can view the full Sociedad Quimica Y Minera De Chile Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 9.5%. 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.
- Net operating cash flow has significantly increased by 51.32% to $59.93 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.55%.
- LEXINGTON REALTY TRUST has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, LEXINGTON REALTY TRUST turned its bottom line around by earning $0.87 versus -$0.29 in the prior year. For the next year, the market is expecting a contraction of 94.8% in earnings ($0.05 versus $0.87).
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 97.3% when compared to the same quarter one year ago, falling from $174.54 million to $4.70 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, LEXINGTON REALTY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Lexington Realty Ratings Report.
- Our dividend calendar.