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." Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.90%. 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 149,500 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $498.1 million and is part of the utilities industry. Shares are down 1.8% year-to-date as of the close of trading on Friday. 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 ($0.56 versus -$0.63).
- NKA, with its very weak revenue results, has greatly underperformed against the industry average of 7.9%. 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.
- 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 7.9%. 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.
- The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 12.9%. 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.
- The gross profit margin for THL CREDIT INC is rather high; currently it is at 61.65%. Regardless of TCRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCRD's net profit margin of 57.81% significantly outperformed against the industry.
- The net income growth from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income increased by 9.4% when compared to the same quarter one year prior, going from $9.78 million to $10.69 million.
- THL CREDIT INC's earnings per share declined by 18.4% in the most recent quarter compared to 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, THL CREDIT INC increased its bottom line by earning $1.45 versus $1.26 in the prior year. For the next year, the market is expecting a contraction of 5.5% in earnings ($1.37 versus $1.45).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TCRD has underperformed the S&P 500 Index, declining 6.75% 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.
- You can view the full THL Credit Ratings Report.
- Our dividend calendar.