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 "Buy." Sabine Royalty (NYSE: SBR) shares currently have a dividend yield of 10.00%. Sabine Royalty Trust holds royalty and mineral interests in various oil and gas properties in the United States. The company has a P/E ratio of 12.26. The average volume for Sabine Royalty has been 19,900 shares per day over the past 30 days. Sabine Royalty has a market cap of $740.5 million and is part of the financial services industry. Shares are up 1.7% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Sabine Royalty as a buy. 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, growth in earnings per share, increase in net income and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. 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 rose by 18.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SBR 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 this, the company maintains a quick ratio of 5.28, which clearly demonstrates the ability to cover short-term cash needs.
- SABINE ROYALTY TRUST has improved earnings per share by 20.3% 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 two years. During the past fiscal year, SABINE ROYALTY TRUST increased its bottom line by earning $4.03 versus $3.59 in the prior year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 20.0% when compared to the same quarter one year prior, going from $11.45 million to $13.74 million.
- The gross profit margin for SABINE ROYALTY TRUST is currently very high, coming in at 100.00%. SBR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, SBR's net profit margin of 96.95% significantly outperformed against the industry.
- You can view the full Sabine Royalty Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 37.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for GOLUB CAPITAL BDC INC is rather high; currently it is at 67.84%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 58.00% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 59.2% when compared to the same quarter one year prior, rising from $9.32 million to $14.84 million.
- GOLUB CAPITAL BDC INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GOLUB CAPITAL BDC INC increased its bottom line by earning $1.36 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 6.6% in earnings ($1.27 versus $1.36).
- In its most recent trading session, GBDC 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Golub Capital BDC Ratings Report.
- MEMP's very impressive revenue growth greatly exceeded the industry average of 7.8%. Since the same quarter one year prior, revenues leaped by 517.8%. 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.
- The gross profit margin for MEMORIAL PRODUCTION PRTRS LP is rather high; currently it is at 65.92%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.79% is above that of the industry average.
- Net operating cash flow has significantly increased by 69.11% to $82.37 million when compared to the same quarter last year. In addition, MEMORIAL PRODUCTION PRTRS LP has also vastly surpassed the industry average cash flow growth rate of -23.34%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 111.2% when compared to the same quarter one year prior, rising from $5.14 million to $10.86 million.
- MEMORIAL PRODUCTION PRTRS LP's earnings per share declined by 5.3% in the most recent quarter compared to 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, MEMORIAL PRODUCTION PRTRS LP turned its bottom line around by earning $0.11 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($2.12 versus $0.11).
- You can view the full Memorial Production Partners Ratings Report.
- Our dividend calendar.