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 3 stocks with substantial yields, that ultimately, we have rated "Buy."Dorchester Minerals L.P (NASDAQ: DMLP) shares currently have a dividend yield of 7.30%. Dorchester Minerals, L.P. engages in the acquisition, ownership, and administration of producing and nonproducing crude oil and natural gas royalty, net profits, and leasehold interests in 574 counties and parishes in 25 states. The company owns royalty properties and net profits interests. The company has a P/E ratio of 18.29. The average volume for Dorchester Minerals L.P has been 37,300 shares per day over the past 30 days. Dorchester Minerals L.P has a market cap of $785.3 million and is part of the financial services industry. Shares are down 1.5% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Dorchester Minerals L.P as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 14.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DMLP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 17.75, which clearly demonstrates the ability to cover short-term cash needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DORCHESTER MINERALS -LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for DORCHESTER MINERALS -LP is currently very high, coming in at 91.85%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.38% significantly outperformed against the industry average.
- Net operating cash flow has increased to $14.83 million or 28.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.54%.
- You can view the full Dorchester Minerals L.P Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 30.6% when compared to the same quarter one year prior, rising from $18.46 million to $24.12 million.
- The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 55.97%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, RSO's net profit margin of 68.27% significantly outperformed against the industry.
- RSO, with its decline in revenue, underperformed when compared the industry average of 9.6%. Since the same quarter one year prior, revenues fell by 19.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- RESOURCE CAPITAL CORP's earnings per share declined by 10.0% in the most recent quarter compared to 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, RESOURCE CAPITAL CORP increased its bottom line by earning $0.72 versus $0.56 in the prior year. For the next year, the market is expecting a contraction of 41.7% in earnings ($0.42 versus $0.72).
- You can view the full Resource Capital Corporation Ratings Report.
- The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.14%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Regarding the stock's future course, although almost any stock can fall in a broad market decline, CODI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- COMPASS DIVERSIFIED HOLDINGS reported significant earnings per share improvement 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 two years. We feel that this trend should continue. During the past fiscal year, COMPASS DIVERSIFIED HOLDINGS continued to lose money by earning -$0.05 versus -$0.81 in the prior year. This year, the market expects an improvement in earnings ($1.61 versus -$0.05).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 2005.2% when compared to the same quarter one year prior, rising from $3.49 million to $73.39 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.4%. Since the same quarter one year prior, revenues rose by 10.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- You can view the full Compass Diversified Holdings Shares of Bene Ratings Report.
- Our dividend calendar.