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." Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 4.50%. Plains All American Pipeline, L.P., together with its subsidiaries, is engaged in transporting, storing, terminalling, and marketing crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 19.26. The average volume for Plains All American Pipeline has been 913,000 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $20.0 billion and is part of the energy industry. Shares are up 7.1% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 12.6%. 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 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, PLAINS ALL AMER PIPELNE -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has remained constant at $360.00 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -23.28%.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 3.4% when compared to the same quarter one year ago, dropping from $320.00 million to $309.00 million.
- You can view the full Plains All American Pipeline Ratings Report.
- The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 9.6%. 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 142.63% to $631.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of -23.28%.
- 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. 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.
- ENERGY TRANSFER PARTNERS -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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ENERGY TRANSFER PARTNERS -LP swung to a loss, reporting -$0.24 versus $5.76 in the prior year. This year, the market expects an improvement in earnings ($2.47 versus -$0.24).
- 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 276.2% when compared to the same quarter one year ago, falling from $307.00 million to -$541.00 million.
- You can view the full Energy Transfer Partners L.P Ratings Report.
- Compared to its closing price of one year ago, NMM's share price has jumped by 25.57%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- NMM's debt-to-equity ratio of 0.75 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.38 is very high and demonstrates very strong liquidity.
- The gross profit margin for NAVIOS MARITIME PARTNERS LP is currently very high, coming in at 91.59%. Regardless of NMM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NMM's net profit margin of 19.41% compares favorably to the industry average.
- NMM, with its decline in revenue, underperformed when compared the industry average of 9.3%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has significantly decreased to $12.94 million or 79.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Navios Maritime Partners L.P Ratings Report.
- Our dividend calendar.