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 "Sell."Diana Containerships (NASDAQ: DCIX) shares currently have a dividend yield of 15.60%. Diana Containerships Inc. operates in the seaborne transportation industry. It owns and operates containerships. Its fleet consists of 6 panamax and 2 post-panamax containerships with a combined carrying capacity of 36,165 TEU. The company was founded in 2010 and is based in Athens, Greece. The average volume for Diana Containerships has been 191,600 shares per day over the past 30 days. Diana Containerships has a market cap of $138.6 million and is part of the transportation industry. Shares are down 4.9% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Diana Containerships as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Marine industry. The net income has significantly decreased by 7400.4% when compared to the same quarter one year ago, falling from $0.27 million to -$19.78 million.
- 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 Marine industry and the overall market, DIANA CONTAINERSHIPS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of DIANA CONTAINERSHIPS INC has not done very well: it is down 24.22% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- DIANA CONTAINERSHIPS INC 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, DIANA CONTAINERSHIPS INC swung to a loss, reporting -$1.75 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($0.02 versus -$1.75).
- DCIX's debt-to-equity ratio of 0.90 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
- You can view the full Diana Containerships Ratings Report.
- Despite currently having a low debt-to-equity ratio of 0.59, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.36 is very low and demonstrates very weak liquidity.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Energy Equipment & Services industry and the overall market, USA COMPRESSION PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for USA COMPRESSION PRTNRS LP is rather high; currently it is at 67.88%. Regardless of USAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.12% trails the industry average.
- Net operating cash flow has significantly increased by 128.57% to $26.51 million when compared to the same quarter last year. In addition, USA COMPRESSION PRTNRS LP has also vastly surpassed the industry average cash flow growth rate of 23.12%.
- USA COMPRESSION PRTNRS LP reported significant earnings per share improvement 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, USA COMPRESSION PRTNRS LP increased its bottom line by earning $0.32 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.57 versus $0.32).
- You can view the full USA Compression Partners Ratings Report.
- 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 Diversified Consumer Services industry. The net income has significantly decreased by 169.2% when compared to the same quarter one year ago, falling from -$11.94 million to -$32.15 million.
- 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 Diversified Consumer Services industry and the overall market, LINCOLN EDUCATIONAL SERVICES's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.29%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 142.50% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- LINCOLN EDUCATIONAL SERVICES 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, LINCOLN EDUCATIONAL SERVICES reported poor results of -$1.51 versus -$1.07 in the prior year. This year, the market expects an improvement in earnings (-$0.72 versus -$1.51).
- LINC, with its decline in revenue, underperformed when compared the industry average of 0.2%. Since the same quarter one year prior, revenues fell by 13.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Lincoln Educational Services Ratings Report.
- Our dividend calendar.