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 which could 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."Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 8.50%. Permian Basin Royalty Trust owns overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 14.91. The average volume for Permian Basin Royalty has been 130,600 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $604.5 million and is part of the energy industry. Shares are up 2.3% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Permian Basin 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 experienced relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 38.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PBT 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 1.16, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 98.85% significantly outperformed against the industry.
- In its most recent trading session, PBT 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. 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.
- 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, PERMIAN BASIN ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Permian Basin Royalty Ratings Report.
- The gross profit margin for NATURAL RESOURCE PARTNERS LP is currently very high, coming in at 94.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 56.79% significantly outperformed against the industry average.
- NRP, with its decline in revenue, underperformed when compared the industry average of 7.8%. Since the same quarter one year prior, revenues fell by 19.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- NATURAL RESOURCE PARTNERS LP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, NATURAL RESOURCE PARTNERS LP reported lower earnings of $1.54 versus $1.97 in the prior year. For the next year, the market is expecting a contraction of 20.1% in earnings ($1.23 versus $1.54).
- Net operating cash flow has decreased to $57.56 million or 25.76% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, NATURAL RESOURCE PARTNERS LP has marginally lower results.
- You can view the full Natural Resources Partners L.P Ratings Report.
- CORR's very impressive revenue growth greatly exceeded the industry average of 16.6%. Since the same quarter one year prior, revenues leaped by 294.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 40.40% is the gross profit margin for CORENERGY INFRASTRUCTURE TR which we consider to be strong. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, CORR's net profit margin of 5.39% significantly trails the industry average.
- CORENERGY INFRASTRUCTURE TR 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, CORENERGY INFRASTRUCTURE TR increased its bottom line by earning $1.35 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 88.9% in earnings ($0.15 versus $1.35).
- Net operating cash flow has significantly decreased to -$1.89 million or 277.61% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The share price of CORENERGY INFRASTRUCTURE TR has not done very well: it is down 5.42% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full CorEnergy Infrastructure Ratings Report.
- Our dividend calendar.