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." WGL Holdings (NYSE: WGL) shares currently have a dividend yield of 4.60%. WGL Holdings, Inc., through its subsidiaries, sells and delivers natural gas, and provides energy-related products and services. The company operates in four segments: Regulated Utility, Retail Energy-Marketing, Commercial Energy Systems, and Midstream Energy Services. The company has a P/E ratio of 42.89. The average volume for WGL Holdings has been 272,200 shares per day over the past 30 days. WGL Holdings has a market cap of $2.0 billion and is part of the utilities industry. Shares are down 3% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates WGL Holdings as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has increased to -$12.61 million or 25.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.50%.
- The debt-to-equity ratio is somewhat low, currently at 0.82, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.36 is very weak and demonstrates a lack of ability to pay short-term obligations.
- WGL, with its decline in revenue, underperformed when compared the industry average of 26.5%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Gas Utilities industry and the overall market on the basis of return on equity, WGL HOLDINGS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for WGL HOLDINGS INC is currently extremely low, coming in at 8.83%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.78% trails that of the industry average.
- You can view the full WGL Holdings Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 71.9% when compared to the same quarter one year prior, rising from -$28.20 million to -$7.93 million.
- Net operating cash flow has significantly increased by 204.87% to $25.20 million when compared to the same quarter last year. In addition, CYPRESS SEMICONDUCTOR CORP has also vastly surpassed the industry average cash flow growth rate of 3.16%.
- CYPRESS SEMICONDUCTOR CORP reported significant earnings per share improvement 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, CYPRESS SEMICONDUCTOR CORP reported poor results of -$0.32 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.53 versus -$0.32).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CYPRESS SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- CY has underperformed the S&P 500 Index, declining 5.15% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full Cypress Semiconductor Ratings Report.
- Compared to other companies in the Metals & Mining industry and the overall market, HI-CRUSH PARTNERS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- HCLP's very impressive revenue growth greatly exceeded the industry average of 7.5%. Since the same quarter one year prior, revenues leaped by 217.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- HCLP's debt-to-equity ratio of 0.94 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 3.17 is very high and demonstrates very strong liquidity.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Metals & Mining industry average, but is greater than that of the S&P 500. The net income increased by 92.1% when compared to the same quarter one year prior, rising from $9.40 million to $18.06 million.
- Net operating cash flow has declined marginally to $11.28 million or 3.55% when compared to the same quarter last year. Despite a decrease in cash flow HI-CRUSH PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -49.83%.
- You can view the full Hi-Crush Partners Ratings Report.
- Our dividend calendar.