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." Martin Midstream Partners (NASDAQ: MMLP) shares currently have a dividend yield of 7.80%. Martin Midstream Partners L.P. collects, transports, stores, and markets petroleum products and by-products in the United States Gulf Coast region. The average volume for Martin Midstream Partners has been 117,800 shares per day over the past 30 days. Martin Midstream Partners has a market cap of $1.1 billion and is part of the energy industry. Shares are down 5.8% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Martin Midstream Partners as a buy. Among the primary strengths of the company is its revenue growth. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 14.6%. 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.
- MARTIN MIDSTREAM PARTNERS LP's earnings per share declined by 29.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MARTIN MIDSTREAM PARTNERS LP swung to a loss, reporting -$0.49 versus $1.33 in the prior year. This year, the market expects an improvement in earnings ($1.48 versus -$0.49).
- The share price of MARTIN MIDSTREAM PARTNERS LP has not done very well: it is down 13.38% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 29.1% when compared to the same quarter one year ago, falling from $16.64 million to $11.80 million.
- The debt-to-equity ratio is very high at 2.51 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, MMLP maintains a poor quick ratio of 0.94, which illustrates the inability to avoid short-term cash problems.
- You can view the full Martin Midstream Partners Ratings Report.