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." NuStar Energy L.P (NYSE: NS) shares currently have a dividend yield of 8.00%. NuStar Energy L.P. is engaged in the terminalling, storage, and marketing of petroleum products, and transportation of petroleum products and anhydrous ammonia primarily in the United States and the Netherlands. The company operates in three segments: Storage, Pipeline, and Fuels Marketing. The average volume for NuStar Energy L.P has been 427,400 shares per day over the past 30 days. NuStar Energy L.P has a market cap of $4.3 billion and is part of the energy industry. Shares are up 7.8% year-to-date as of the close of trading on Monday. TheStreet Ratings rates NuStar Energy L.P as a hold. The company's strengths can be seen in multiple areas, such as its 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 deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 290.42% to $106.68 million when compared to the same quarter last year. In addition, NUSTAR ENERGY LP has also vastly surpassed the industry average cash flow growth rate of -23.15%.
- NUSTAR ENERGY 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. 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, NUSTAR ENERGY LP continued to lose money by earning -$2.89 versus -$3.05 in the prior year. This year, the market expects an improvement in earnings ($1.95 versus -$2.89).
- NS, with its decline in revenue, underperformed when compared the industry average of 7.9%. Since the same quarter one year prior, revenues fell by 20.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, NUSTAR ENERGY 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 3335.5% when compared to the same quarter one year ago, falling from -$10.62 million to -$364.82 million.
- You can view the full NuStar Energy L.P Ratings Report.