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." NuStar Energy L.P (NYSE: NS) shares currently have a dividend yield of 7.40%. NuStar Energy L.P. is engaged in the terminalling, storage, and marketing of petroleum products, and transportation of petroleum products and anhydrous ammonia primarily in the United States and the Netherlands. The company operates in three segments: Storage, Pipeline, and Fuels Marketing. The average volume for NuStar Energy L.P has been 488,100 shares per day over the past 30 days. NuStar Energy L.P has a market cap of $4.6 billion and is part of the energy industry. Shares are up 15.8% year-to-date as of the close of trading on Monday. TheStreet Ratings rates NuStar Energy L.P as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and increase in net income. 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:
- 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.
- NUSTAR ENERGY 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. We feel that this trend should continue. During the past fiscal year, NUSTAR ENERGY LP continued to lose money by earning -$2.89 versus -$3.05 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus -$2.89).
- 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 61.4% when compared to the same quarter one year prior, rising from $24.57 million to $39.64 million.
- NS, with its decline in revenue, underperformed when compared the industry average of 3.3%. Since the same quarter one year prior, revenues fell by 15.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for NUSTAR ENERGY LP is rather low; currently it is at 17.45%. Regardless of NS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.66% trails the industry average.
- You can view the full NuStar Energy L.P Ratings Report.
- DUK's revenue growth has slightly outpaced the industry average of 9.2%. 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.
- Net operating cash flow has increased to $1,373.00 million or 25.84% when compared to the same quarter last year. In addition, DUKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 18.42%.
- DUKE ENERGY CORP 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. 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, DUKE ENERGY CORP increased its bottom line by earning $3.73 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($4.58 versus $3.73).
- The gross profit margin for DUKE ENERGY CORP is currently lower than what is desirable, coming in at 34.48%. Regardless of DUK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.46% trails the industry average.
- Even though the current debt-to-equity ratio is 1.02, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.47 is very low and demonstrates very weak liquidity.
- You can view the full Duke Energy Corporation Ratings Report.
- AMERIGAS PARTNERS -LP has improved earnings per share by 9.6% 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, AMERIGAS PARTNERS -LP turned its bottom line around by earning $1.43 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($2.92 versus $1.43).
- Despite its growing revenue, the company underperformed as compared with the industry average of 35.9%. Since the same quarter one year prior, revenues rose by 27.0%. 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 12.6% when compared to the same quarter one year prior, going from $213.21 million to $240.10 million.
- In its most recent trading session, APU 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, the stock's 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 the other strengths this company displays justify these higher price levels.
- You can view the full AmeriGas Partners Ratings Report.
- Our dividend calendar.