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 "Sell." Life Partners Holdings (NASDAQ: LPHI) shares currently have a dividend yield of 7.30%. Life Partners Holdings, Inc., through its subsidiary, Life Partners, Inc., operates in the secondary market for life insurance worldwide. It facilitates the sale of life settlements between sellers and purchasers, but does not take possession or control of the policies. The average volume for Life Partners Holdings has been 40,400 shares per day over the past 30 days. Life Partners Holdings has a market cap of $50.9 million and is part of the insurance industry. Shares are up 50.6% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Life Partners Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Financial Services industry and the overall market, LIFE PARTNERS HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- LPHI has underperformed the S&P 500 Index, declining 19.70% 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 net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Diversified Financial Services industry average. The net income increased by 3.0% when compared to the same quarter one year prior, going from -$1.85 million to -$1.79 million.
- LPHI, with its very weak revenue results, has greatly underperformed against the industry average of 13.4%. Since the same quarter one year prior, revenues plummeted by 86.3%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- LIFE PARTNERS HOLDINGS INC reported flat earnings per share in the most recent quarter. Stable Earnings per share over the past year indicate the company has sound management over its earnings and share float. During the past fiscal year, LIFE PARTNERS HOLDINGS INC continued to lose money by earning -$0.16 versus -$0.17 in the prior year.
- You can view the full Life Partners Holdings Ratings Report.
- The debt-to-equity ratio is very high at 45.89 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, LGP has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- The gross profit margin for LEHIGH GAS PARTNERS LP is currently extremely low, coming in at 3.51%. Regardless of LGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.00% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.6%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- LEHIGH GAS PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.24 versus $0.23).
- 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 1194.2% when compared to the same quarter one year prior, rising from -$0.45 million to $4.92 million.
- You can view the full Lehigh Gas Partners Ratings Report.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.78%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 91.40% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- APOLLO RESIDENTIAL MTG INC 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. For the next year, the market is expecting a contraction of 74.1% in earnings ($2.12 versus $8.19).
- 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 83.4% when compared to the same quarter one year ago, falling from $70.40 million to $11.69 million.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, APOLLO RESIDENTIAL MTG INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for APOLLO RESIDENTIAL MTG INC is currently very high, coming in at 82.48%. Regardless of AMTG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AMTG's net profit margin of 33.95% significantly outperformed against the industry.
- You can view the full Apollo Residential Mortgage Ratings Report.
- Our dividend calendar.