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 7.20%. 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 473,400 shares per day over the past 30 days. NuStar Energy L.P has a market cap of $4.7 billion and is part of the energy industry. Shares are up 18.7% year-to-date as of the close of trading on Tuesday. 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 somewhat disappointing return on equity. Highlights from the ratings report include:
- Powered by its strong earnings growth of 300.00% and other important driving factors, this stock has surged by 35.23% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NS should continue to move higher despite the fact that it has already enjoyed a very nice gain 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 ($2.00 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 61.8% when compared to the same quarter one year prior, rising from $24.57 million to $39.74 million.
- NS, with its decline in revenue, underperformed when compared the industry average of 3.1%. Since the same quarter one year prior, revenues fell by 14.9%. 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 4.68% trails the industry average.
- You can view the full NuStar Energy L.P Ratings Report.