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 "Sell." Golar LNG Partners (NASDAQ: GMLP) shares currently have a dividend yield of 7.10%. Golar LNG Partners LP owns and operates floating storage regasification units (FSRUs) and liquefied natural gas (LNG) carriers primarily in the Brazil, the United Arab Emirates, and Indonesia. As of December 5, 2013, its fleet consisted of three FSRUs and two LNG carriers. The company has a P/E ratio of 14.23. The average volume for Golar LNG Partners has been 304,000 shares per day over the past 30 days. Golar LNG Partners has a market cap of $1.4 billion and is part of the transportation industry. Shares are down 2.4% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Golar LNG Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 3.48 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- In its most recent trading session, GMLP 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. 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.
- 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOLAR LNG PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- GOLAR LNG PARTNERS LP's earnings per share declined by 13.7% in the most recent quarter compared to the same quarter a year ago. 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, GOLAR LNG PARTNERS LP increased its bottom line by earning $2.66 versus $1.76 in the prior year.
- The gross profit margin for GOLAR LNG PARTNERS LP is currently very high, coming in at 84.81%. Regardless of GMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GMLP's net profit margin of 40.37% significantly outperformed against the industry.
- You can view the full Golar LNG Partners Ratings Report.
- 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 90.2% when compared to the same quarter one year ago, falling from $61.22 million to $6.00 million.
- 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 other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AG MORTGAGE INVESTMENT TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 32.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 97.09% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- AG MORTGAGE INVESTMENT TRUST 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, AG MORTGAGE INVESTMENT TRUST increased its bottom line by earning $7.34 versus $2.01 in the prior year. For the next year, the market is expecting a contraction of 65.7% in earnings ($2.52 versus $7.34).
- MITT, with its very weak revenue results, has greatly underperformed against the industry average of 6.8%. Since the same quarter one year prior, revenues plummeted by 119.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full AG Mortgage Investment Ratings Report.
- 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 45.8% when compared to the same quarter one year ago, falling from $0.61 million to $0.33 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.
- Net operating cash flow has declined marginally to $4.31 million or 9.67% when compared to the same quarter last year. Despite a decrease in cash flow of 9.67%, GLADSTONE COMMERCIAL CORP is still significantly exceeding the industry average of -76.73%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GOOD has underperformed the S&P 500 Index, declining 7.43% 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.
- GLADSTONE COMMERCIAL CORP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GLADSTONE COMMERCIAL CORP reported poor results of -$0.22 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings (-$0.16 versus -$0.22).
- You can view the full Gladstone Commercial Corporation Ratings Report.
- Our dividend calendar.