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 "Hold."Suburban Propane Partners (NYSE: SPH) shares currently have a dividend yield of 8.00%. Suburban Propane Partners, L.P., through its subsidiaries, is engaged in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 33.29. The average volume for Suburban Propane Partners has been 173,300 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $2.6 billion and is part of the utilities industry. Shares are down 5.9% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Suburban Propane Partners as a hold. 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 and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- SPH's revenue growth trails the industry average of 26.5%. Since the same quarter one year prior, revenues slightly increased by 7.2%. 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.
- SUBURBAN PROPANE PRTNRS -LP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, SUBURBAN PROPANE PRTNRS -LP increased its bottom line by earning $1.45 versus $0.48 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus $1.45).
- Even though the current debt-to-equity ratio is 1.09, it is still below the industry average, suggesting that this level of debt is acceptable within the Gas Utilities industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.92 is weak.
- Net operating cash flow has significantly decreased to $4.16 million or 93.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SPH has underperformed the S&P 500 Index, declining 8.72% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Suburban Propane Partners Ratings Report.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NEW SOURCE ENERGY PRTRS LP's return on equity exceeds that of both the industry average and the S&P 500.
- NSLP's very impressive revenue growth greatly exceeded the industry average of 0.2%. Since the same quarter one year prior, revenues leaped by 99.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- NEW SOURCE ENERGY PRTRS 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NEW SOURCE ENERGY PRTRS LP increased its bottom line by earning $2.92 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 44.5% in earnings ($1.62 versus $2.92).
- NSLP's debt-to-equity ratio of 0.61 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.05 is sturdy.
- You can view the full New Source Energy Partners Ratings Report.
- EVEP's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 4.1%. 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.
- EVEP's debt-to-equity ratio of 0.91 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.02 is sturdy.
- EV ENERGY 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 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, EV ENERGY PARTNERS LP reported poor results of -$1.69 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus -$1.69).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EV ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $33.26 million or 3.53% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, EV ENERGY PARTNERS LP has marginally lower results.
- You can view the full EV Energy Partners Ratings Report.
- Our dividend calendar.