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 "Buy."Suburban Propane Partners (NYSE: SPH) shares currently have a dividend yield of 7.80%. 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 29.74. The average volume for Suburban Propane Partners has been 174,300 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $2.7 billion and is part of the utilities industry. Shares are down 3.4% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Suburban Propane Partners as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, robust revenue growth and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- SUBURBAN PROPANE PRTNRS -LP has improved earnings per share by 9.3% 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 year. We feel that this trend should continue. During the past fiscal year, SUBURBAN PROPANE PRTNRS -LP increased its bottom line by earning $1.44 versus $0.48 in the prior year. This year, the market expects an improvement in earnings ($2.03 versus $1.44).
- Despite its growing revenue, the company underperformed as compared with the industry average of 35.8%. Since the same quarter one year prior, revenues rose by 28.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Gas Utilities industry average. The net income increased by 15.5% when compared to the same quarter one year prior, going from $129.49 million to $149.55 million.
- The debt-to-equity ratio of 1.05 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, SPH has managed to keep a strong quick ratio of 1.79, which demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SUBURBAN PROPANE PRTNRS -LP is currently lower than what is desirable, coming in at 25.92%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 17.11% is above that of the industry average.
- You can view the full Suburban Propane Partners Ratings Report.
- The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 20.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HGT 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, HUGOTON ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- 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 56.9% when compared to the same quarter one year prior, rising from $4.74 million to $7.43 million.
- You can view the full Hugoton Royalty Ratings Report.
- 46.05% is the gross profit margin for COMPRESSCO PARTNERS LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.49% is above that of the industry average.
- COMPRESSCO PARTNERS LP reported flat earnings per share in the most recent 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, COMPRESSCO PARTNERS LP increased its bottom line by earning $1.11 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.43 versus $1.11).
- Compared to its closing price of one year ago, GSJK's share price has jumped by 36.96%, 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.
- GSJK, with its decline in revenue, underperformed when compared the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 1.8% when compared to the same quarter one year prior, going from $4.54 million to $4.62 million.
- You can view the full Compressco Partners Ratings Report.
- Our dividend calendar.