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 9.90%. 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 20,100 shares per day over the past 30 days. Sabine Royalty has a market cap of $745.7 million and is part of the financial services industry. Shares are up 0.8% 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 no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.5%. 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 significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. 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 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. In comparison to the other companies in the Capital Markets industry and the overall market, TRIANGLE CAPITAL CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The gross profit margin for TRIANGLE CAPITAL CORP is currently very high, coming in at 83.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 80.81% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 75.61% to -$12.28 million when compared to the same quarter last year. Despite an increase in cash flow, TRIANGLE CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 96.60%.
- TRIANGLE CAPITAL CORP has improved earnings per share by 12.3% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, TRIANGLE CAPITAL CORP increased its bottom line by earning $2.94 versus $2.23 in the prior year. For the next year, the market is expecting a contraction of 26.9% in earnings ($2.15 versus $2.94).
- TCAP, with its decline in revenue, slightly underperformed the industry average of 10.4%. Since the same quarter one year prior, revenues fell by 11.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Triangle Capital Corporation Ratings Report.
- LRE's revenue growth has slightly outpaced the industry average of 7.5%. Since the same quarter one year prior, revenues slightly increased by 1.4%. 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 slightly increased to $17.83 million or 1.16% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -22.86%.
- LRR 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. 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, LRR ENERGY LP reported poor results of -$1.90 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus -$1.90).
- In its most recent trading session, LRE 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- The debt-to-equity ratio of 1.30 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, LRE has managed to keep a strong quick ratio of 1.68, which demonstrates the ability to cover short-term cash needs.
- You can view the full LRR Energy Ratings Report.
- Our dividend calendar.