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." PVR Partners (NYSE: PVR) shares currently have a dividend yield of 8.10%. PVR Partners, L.P. gathers and processes natural gas; and manages coal and natural resource properties in the United States. It operates in three segments: Eastern Midstream, Midcontinent Midstream, and Coal and Natural Resource Management. The average volume for PVR Partners has been 480,200 shares per day over the past 30 days. PVR Partners has a market cap of $3.1 billion and is part of the energy industry. Shares are up 1.6% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates PVR Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and generally higher debt management risk. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 4.8%. 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.
- Net operating cash flow has significantly increased by 132.42% to $24.33 million when compared to the same quarter last year. In addition, PVR PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -23.37%.
- 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. 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.
- The gross profit margin for PVR PARTNERS LP is currently lower than what is desirable, coming in at 33.11%. Regardless of PVR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PVR's net profit margin of -6.04% significantly underperformed when compared to the industry average.
- 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 156.8% when compared to the same quarter one year ago, falling from -$6.87 million to -$17.64 million.
- You can view the full PVR Partners Ratings Report.