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." Town Sports International Holdings (NASDAQ: CLUB) shares currently have a dividend yield of 10.60%. Town Sports International Holdings, Inc., together with its subsidiaries, owns and operates fitness clubs in the Northeast and Mid-Atlantic regions of the United States. The company has a P/E ratio of 35.53. The average volume for Town Sports International Holdings has been 152,500 shares per day over the past 30 days. Town Sports International Holdings has a market cap of $146.6 million and is part of the leisure industry. Shares are down 60.3% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Town Sports International Holdings as a hold. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including deteriorating net income, weak operating cash flow and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.0%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 183.33% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- TOWN SPORTS INTL HOLDINGS 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. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, TOWN SPORTS INTL HOLDINGS's EPS of $0.50 remained unchanged from the prior years' EPS of $0.50. For the next year, the market is expecting a contraction of 118.0% in earnings (-$0.09 versus $0.50).
- The gross profit margin for TOWN SPORTS INTL HOLDINGS is rather low; currently it is at 18.75%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.03% is significantly below that of the industry average.
- Net operating cash flow has decreased to $14.40 million or 33.85% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Town Sports International Holdings Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 29.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 86.6% when compared to the same quarter one year prior, rising from -$46.58 million to -$6.25 million.
- EV ENERGY PARTNERS LP 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, 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 ($1.08 versus -$1.69).
- The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, EVEP's quick ratio is somewhat strong at 1.17, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has decreased to $32.63 million or 21.15% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full EV Energy Partners Ratings Report.
- CORR's very impressive revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues leaped by 172.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 535.3% when compared to the same quarter one year prior, rising from -$0.36 million to $1.58 million.
- CORENERGY INFRASTRUCTURE TR 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, CORENERGY INFRASTRUCTURE TR reported lower earnings of $0.18 versus $1.35 in the prior year. This year, the market expects an improvement in earnings ($0.29 versus $0.18).
- CORR has underperformed the S&P 500 Index, declining 7.49% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- 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 Capital Markets industry and the overall market on the basis of return on equity, CORENERGY INFRASTRUCTURE TR underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full CorEnergy Infrastructure Ratings Report.
- Our dividend calendar.