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." New Source Energy Partners (NYSE: NSLP) shares currently have a dividend yield of 10.10%. New Source Energy Partners L.P. is engaged in the acquisition and development of oil and natural gas properties in the United States. The average volume for New Source Energy Partners has been 64,100 shares per day over the past 30 days. New Source Energy Partners has a market cap of $312.5 million and is part of the energy industry. Shares are down 0.7% year-to-date as of the close of trading on Friday. TheStreet Ratings rates New Source Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive. Highlights from the ratings report include:
- NSLP's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 193.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, NEW SOURCE ENERGY PRTRS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- NSLP's debt-to-equity ratio of 0.70 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.91 is weak.
- 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 9.6% when compared to the same quarter one year ago, dropping from -$1.40 million to -$1.53 million.
- You can view the full New Source Energy Partners Ratings Report.