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." Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 11.80%. Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America. The average volume for Niska Gas Storage Partners has been 105,700 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $419.7 million and is part of the utilities industry. Shares are down 15.3% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year 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 poor profit margins. Highlights from the ratings report include:
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- NISKA GAS STORAGE PARTNERS 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.63 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($0.20 versus -$0.63).
- NKA, with its very weak revenue results, has greatly underperformed against the industry average of 2.4%. Since the same quarter one year prior, revenues plummeted by 65.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio of 1.41 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, NKA has a quick ratio of 0.54, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 228.7% when compared to the same quarter one year ago, falling from $10.42 million to -$13.41 million.
- You can view the full Niska Gas Storage Partners Ratings Report.
- Net operating cash flow has increased to $56.02 million or 49.17% when compared to the same quarter last year. In addition, DYNEX CAPITAL INC has also vastly surpassed the industry average cash flow growth rate of -59.31%.
- The gross profit margin for DYNEX CAPITAL INC is currently very high, coming in at 88.51%. Regardless of DX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DX's net profit margin of -14.64% significantly underperformed when compared to the industry average.
- The share price of DYNEX CAPITAL INC has not done very well: it is down 17.87% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- 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 124.1% when compared to the same quarter one year ago, falling from $19.17 million to -$4.63 million.
- You can view the full Dynex Capital Ratings Report.
- The revenue growth came in higher than the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 18.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 75.4% when compared to the same quarter one year prior, rising from -$50.02 million to -$12.31 million.
- The gross profit margin for EV ENERGY PARTNERS LP is rather high; currently it is at 63.11%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -15.12% is in-line with the industry average.
- The debt-to-equity ratio of 1.14 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, EVEP maintains a poor quick ratio of 0.93, which illustrates the inability to avoid short-term cash problems.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, EV ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full EV Energy Partner Ratings Report.
- Our dividend calendar.