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 7.80%. 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 34.34. The average volume for Suburban Propane Partners has been 167,300 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 4.8% year-to-date as of the close of trading on Thursday. 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- 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 ($2.08 versus $1.44).
- SPH's revenue growth trails the industry average of 17.7%. 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Gas Utilities industry and the overall market on the basis of return on equity, SUBURBAN PROPANE PRTNRS -LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, SPH maintains a poor quick ratio of 0.86, which illustrates the inability to avoid short-term cash problems.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Gas Utilities industry average. The net income has decreased by 2.5% when compared to the same quarter one year ago, dropping from -$61.60 million to -$63.12 million.
- You can view the full Suburban Propane Partners Ratings Report.
- The gross profit margin for SHIP FINANCE INTL LTD is rather high; currently it is at 59.98%. Regardless of SFL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SFL's net profit margin of 19.77% significantly outperformed against the industry.
- SFL, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- SHIP FINANCE INTL LTD 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, SHIP FINANCE INTL LTD increased its bottom line by earning $2.26 versus $1.61 in the prior year. For the next year, the market is expecting a contraction of 55.5% in earnings ($1.01 versus $2.26).
- The debt-to-equity ratio of 1.49 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, SFL has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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, SHIP FINANCE INTL LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Ship Finance International Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 25.6% when compared to the same quarter one year prior, rising from $8.37 million to $10.51 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Capital Markets industry and the overall market, GLADSTONE CAPITAL CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 16.8%. Since the same quarter one year prior, revenues fell by 14.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- In its most recent trading session, GLAD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Net operating cash flow has significantly decreased to -$1.20 million or 113.62% 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 Gladstone Capital Ratings Report.
- Our dividend calendar.