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 "Buy." Natural Resources Partners L.P (NYSE: NRP) shares currently have a dividend yield of 11.20%. Natural Resource Partners L.P., through its subsidiaries, engages in the ownership, management, and leasing of mineral properties in the United States. The company has a P/E ratio of 11.80. The average volume for Natural Resources Partners L.P has been 267,500 shares per day over the past 30 days. Natural Resources Partners L.P has a market cap of $2.2 billion and is part of the metals & mining industry. Shares are up 1.6% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Natural Resources Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, notable return on equity 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:
- Net operating cash flow has slightly increased to $65.87 million or 6.46% when compared to the same quarter last year. In addition, NATURAL RESOURCE PARTNERS LP has also modestly surpassed the industry average cash flow growth rate of 0.96%.
- The gross profit margin for NATURAL RESOURCE PARTNERS LP is currently very high, coming in at 92.73%. Regardless of NRP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NRP's net profit margin of 48.16% significantly outperformed against the industry.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, NATURAL RESOURCE PARTNERS LP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- NRP, with its decline in revenue, underperformed when compared the industry average of 5.6%. Since the same quarter one year prior, revenues fell by 20.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, NRP 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full Natural Resources Partners L.P Ratings Report.