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."North European Oil Royalty (NYSE: NRT) shares currently have a dividend yield of 9.60%. North European Oil Royalty Trust, a grantor trust, holds overriding royalty rights covering gas and oil production in concessions or leases in the Federal Republic of Germany. It holds these rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. The company has a P/E ratio of 10.99. The average volume for North European Oil Royalty has been 18,000 shares per day over the past 30 days. North European Oil Royalty has a market cap of $214.1 million and is part of the financial services industry. Shares are up 16% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates North European Oil Royalty as a buy. Highlights from the ratings report include:
- NRT, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 11.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 12.0% when compared to the same quarter one year ago, dropping from $5.84 million to $5.14 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, NRT has underperformed the S&P 500 Index, declining 6.20% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- NORTH EUROPEAN OIL RTY TR's earnings per share declined by 12.5% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, NORTH EUROPEAN OIL RTY TR reported lower earnings of $2.26 versus $2.46 in the prior year.
- You can view the full North European Oil Royalty Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 48.3%. 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 significantly increased by 70.62% to $48.02 million when compared to the same quarter last year. In addition, MEMORIAL PRODUCTION PRTRS LP has also vastly surpassed the industry average cash flow growth rate of 17.46%.
- The gross profit margin for MEMORIAL PRODUCTION PRTRS LP is rather high; currently it is at 66.27%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -33.78% is in-line with the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- MEMORIAL PRODUCTION PRTRS LP 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, MEMORIAL PRODUCTION PRTRS LP turned its bottom line around by earning $0.11 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $0.11).
- You can view the full Memorial Production Partners Ratings Report.
- The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- VOC 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 stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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 Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 15.2% when compared to the same quarter one year prior, going from $7.82 million to $9.01 million.
- The gross profit margin for VOC ENERGY TRUST is currently very high, coming in at 100.00%. VOC has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, VOC's net profit margin of 99.49% significantly outperformed against the industry.
- You can view the full VOC Energy Ratings Report.
- Our dividend calendar.