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 "Hold." Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 9.50%. Mesa Royalty Trust holds net overriding royalty interests in various oil and gas producing properties in the United States. It has interests in properties located in the Hugoton field of Kansas; the San Juan Basin field of New Mexico and Colorado; and the Yellow Creek field of Wyoming. The company has a P/E ratio of 12.71. The average volume for Mesa Royalty has been 7,300 shares per day over the past 30 days. Mesa Royalty has a market cap of $42.4 million and is part of the financial services industry. Shares are up 6.8% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Mesa Royalty as a hold. 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 and increase in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.4%. Since the same quarter one year prior, revenues rose by 24.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MTR 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 6.53, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for MESA ROYALTY TRUST is currently very high, coming in at 100.00%. MTR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MTR's net profit margin of 96.29% significantly outperformed against the industry.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, MESA ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- MTR has underperformed the S&P 500 Index, declining 8.91% 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.
- You can view the full Mesa Royalty Ratings Report.
- This stock has managed to rise its share value by 70.15% over the past twelve months. Although BGCP had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 5715.5% when compared to the same quarter one year prior, rising from -$0.45 million to $25.33 million.
- Net operating cash flow has significantly increased by 252.14% to $42.54 million when compared to the same quarter last year. Despite an increase in cash flow, BGC PARTNERS INC's average is still marginally south of the industry average growth rate of 254.30%.
- Despite the weak revenue results, BGCP has outperformed against the industry average of 15.2%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for BGC PARTNERS INC is rather low; currently it is at 15.27%. Regardless of BGCP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BGCP's net profit margin of 5.84% is significantly lower than the industry average.
- You can view the full BGC Partners Ratings Report.
- Since the same quarter one year prior, revenues slightly increased by 7.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Net operating cash flow has increased to $0.44 million or 29.23% when compared to the same quarter last year.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation.
- Compared to its price level of one year ago, SMTP is down 7.41% to its most recent closing price of 6.25. Looking ahead, our view is that this company's fundamentals will not have much impact either way, allowing the stock to generally move up or down based on the push and pull of the broad market.
- SMTP INC reported flat earnings per share in the most recent quarter. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SMTP INC increased its bottom line by earning $0.35 versus $0.25 in the prior year.
- You can view the full SMTP Ratings Report.
- MSB 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.47, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for MESABI TRUST is currently very high, coming in at 100.00%. MSB has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MSB's net profit margin of 96.67% significantly outperformed against the industry.
- The revenue fell significantly faster than the industry average of 2.4%. Since the same quarter one year prior, revenues fell by 46.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Metals & Mining industry. The net income has significantly decreased by 47.2% when compared to the same quarter one year ago, falling from $11.62 million to $6.14 million.
- Net operating cash flow has significantly decreased to $6.89 million or 52.95% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Mesabi Ratings Report.
- Our dividend calendar.