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 "Hold."Suburban Propane Partners (NYSE: SPH) shares currently have a dividend yield of 7.70%. Suburban Propane Partners, L.P., through its subsidiaries, is engaged in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 33.78. The average volume for Suburban Propane Partners has been 162,700 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $2.7 billion and is part of the utilities industry. Shares are down 5.5% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Suburban Propane Partners as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and unimpressive growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.0%. Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SUBURBAN PROPANE PRTNRS -LP has improved earnings per share by 18.6% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SUBURBAN PROPANE PRTNRS -LP increased its bottom line by earning $1.44 versus $0.48 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $1.44).
- Even though the current debt-to-equity ratio is 1.10, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.86 is weak.
- The gross profit margin for SUBURBAN PROPANE PRTNRS -LP is currently extremely low, coming in at 6.27%. Regardless of SPH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SPH's net profit margin of -25.90% significantly underperformed when compared to the industry average.
- Net operating cash flow has significantly decreased to $13.84 million or 63.31% 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 Suburban Propane Partners Ratings Report.
- The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 24.8%. 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 slightly increased to $8.03 million or 2.16% when compared to the same quarter last year. In addition, GLADSTONE COMMERCIAL CORP has also modestly surpassed the industry average cash flow growth rate of -0.44%.
- 46.64% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 1.92% is significantly lower than 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 68.6% when compared to the same quarter one year ago, falling from $0.99 million to $0.31 million.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Gladstone Commercial Corporation Ratings Report.
- CORR's very impressive revenue growth greatly exceeded the industry average of 15.2%. Since the same quarter one year prior, revenues leaped by 294.5%. 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.
- 40.40% is the gross profit margin for CORENERGY INFRASTRUCTURE TR which we consider to be strong. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, CORR's net profit margin of 5.39% significantly trails the industry average.
- CORENERGY INFRASTRUCTURE TR 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, CORENERGY INFRASTRUCTURE TR increased its bottom line by earning $1.35 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 88.9% in earnings ($0.15 versus $1.35).
- 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 Capital Markets industry. The net income has significantly decreased by 91.2% when compared to the same quarter one year ago, falling from $4.99 million to $0.44 million.
- 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, CORENERGY INFRASTRUCTURE TR underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full CorEnergy Infrastructure Ratings Report.
- Our dividend calendar.