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 5 stocks with substantial yields, that ultimately, we have rated "Hold." Rhino Resource Partners (NYSE: RNO) shares currently have a dividend yield of 14.10%. Rhino Resource Partners LP, together with its subsidiaries, produces, processes, and sells various grades of steam and metallurgical coal from surface and underground mines in the United States. The company has a P/E ratio of 20.00. The average volume for Rhino Resource Partners has been 97,700 shares per day over the past 30 days. Rhino Resource Partners has a market cap of $210.1 million and is part of the metals & mining industry. Shares are up 10.1% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Rhino Resource Partners as a hold. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- RNO, with its decline in revenue, underperformed when compared the industry average of 5.7%. Since the same quarter one year prior, revenues fell by 24.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for RHINO RESOURCE PARTNERS LP is currently lower than what is desirable, coming in at 29.44%. Regardless of RNO'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 4.04% trails the industry average.
- Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that RNO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.65 is low and demonstrates weak liquidity.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, RHINO RESOURCE PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to $11.15 million or 54.83% 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 Rhino Resource Partners Ratings Report.