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 "Hold."Atlas Pipeline Partners (NYSE: APL) shares currently have a dividend yield of 7.60%. Atlas Pipeline Partners, L.P. operates in the gathering and processing segments of the midstream natural gas industry. It operates through two segments, Gathering and Processing; and Transportation, Treating, and Other. The average volume for Atlas Pipeline Partners has been 467,600 shares per day over the past 30 days. Atlas Pipeline Partners has a market cap of $2.6 billion and is part of the energy industry. Shares are down 7.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Atlas Pipeline Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- APL's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 69.6%. 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 115.9% when compared to the same quarter one year prior, rising from -$28.86 million to $4.59 million.
- ATLAS PIPELINE PARTNER LP has improved earnings per share by 43.8% 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, ATLAS PIPELINE PARTNER LP swung to a loss, reporting -$2.19 versus $0.97 in the prior year. This year, the market expects an improvement in earnings (-$0.25 versus -$2.19).
- 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 Oil, Gas & Consumable Fuels industry and the overall market, ATLAS PIPELINE PARTNER LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ATLAS PIPELINE PARTNER LP is currently extremely low, coming in at 12.45%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.64% trails that of the industry average.
- You can view the full Atlas Pipeline Partners Ratings Report.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The net income growth from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 8.1% when compared to the same quarter one year prior, going from $31.31 million to $33.84 million.
- VLY, with its decline in revenue, slightly underperformed the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $35.20 million or 12.73% when compared to the same quarter last year. Despite a decrease in cash flow VALLEY NATIONAL BANCORP is still fairing well by exceeding its industry average cash flow growth rate of -42.36%.
- You can view the full Valley National Bancorp Ratings Report.
- Net operating cash flow has slightly increased to $359.85 million or 3.53% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -15.13%.
- SPLS's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 43.4% when compared to the same quarter one year ago, falling from $169.93 million to $96.21 million.
- The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 26.94%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.70% trails that of the industry average.
- You can view the full Staples Ratings Report.
- Our dividend calendar.