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."Consolidated Communications (NASDAQ: CNSL) shares currently have a dividend yield of 7.80%. Consolidated Communications Holdings, Inc., together with its subsidiaries, provides telecommunications services to residential and business customers in Illinois, Texas, Pennsylvania, California, Kansas, and Missouri. The company has a P/E ratio of 27.34. The average volume for Consolidated Communications has been 224,600 shares per day over the past 30 days. Consolidated Communications has a market cap of $800.6 million and is part of the telecommunications industry. Shares are up 1.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Consolidated Communications as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- CONSOLIDATED COMM HLDGS INC has improved earnings per share by 14.3% 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, CONSOLIDATED COMM HLDGS INC increased its bottom line by earning $0.74 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.86 versus $0.74).
- 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. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 62.37%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CNSL's net profit margin of 2.12% is significantly lower than the industry average.
- Net operating cash flow has decreased to $43.72 million or 14.81% 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.
- The debt-to-equity ratio is very high at 8.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CNSL has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Consolidated Communications Ratings Report.
- The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 53.51%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RSO's net profit margin of 2.78% significantly trails the industry average.
- RSO, with its decline in revenue, underperformed when compared the industry average of 6.3%. Since the same quarter one year prior, revenues fell by 16.7%. 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 92.3% when compared to the same quarter one year ago, falling from $15.05 million to $1.17 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Resource Capital Corporation Ratings Report.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- MMLP, with its decline in revenue, underperformed when compared the industry average of 3.8%. Since the same quarter one year prior, revenues fell by 15.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- MARTIN MIDSTREAM PARTNERS LP 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. 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, MARTIN MIDSTREAM PARTNERS LP swung to a loss, reporting -$0.49 versus $1.33 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus -$0.49).
- 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 Oil, Gas & Consumable Fuels industry and the overall market, MARTIN MIDSTREAM PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 430.9% when compared to the same quarter one year ago, falling from $11.87 million to -$39.26 million.
- You can view the full Martin Midstream Partners L.P Ratings Report.
- Our dividend calendar.