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." NGL Energy Partners (NYSE: NGL) shares currently have a dividend yield of 5.10%. NGL Energy Partners LP, through its subsidiaries, is primarily engaged in the crude oil logistics, water solutions, liquids, and retail propane businesses in the United States. It operates through Crude Oil Logistics, Water Solutions, Liquids, and Retail Propane segments. The company has a P/E ratio of 85.59. The average volume for NGL Energy Partners has been 331,400 shares per day over the past 30 days. NGL Energy Partners has a market cap of $3.3 billion and is part of the energy industry. Shares are up 27.1% year-to-date as of the close of trading on Monday. TheStreet Ratings rates NGL Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- NGL's very impressive revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues leaped by 145.8%. 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 Oil, Gas & Consumable Fuels industry. The net income increased by 89.5% when compared to the same quarter one year prior, rising from $22.34 million to $42.33 million.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 47.07% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- NGL ENERGY PARTNERS LP has improved earnings per share by 17.9% 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, NGL ENERGY PARTNERS LP reported lower earnings of $0.32 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $0.32).
- The debt-to-equity ratio of 1.07 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NGL maintains a poor quick ratio of 0.92, which illustrates the inability to avoid short-term cash problems.
- You can view the full NGL Energy Partners Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 6.0%. 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 slightly increased to $31.07 million or 4.78% when compared to the same quarter last year. Despite an increase in cash flow, GOVERNMENT PPTYS INCOME TR's cash flow growth rate is still lower than the industry average growth rate of 29.86%.
- GOVERNMENT PPTYS INCOME TR's earnings per share declined by 23.3% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, GOVERNMENT PPTYS INCOME TR increased its bottom line by earning $1.02 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $1.02).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GOVERNMENT PPTYS INCOME TR's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Government Properties Income Ratings Report.
- The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 22.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, BLACKSTONE GROUP LP's return on equity exceeds that of both the industry average and the S&P 500.
- Powered by its strong earnings growth of 51.72% and other important driving factors, this stock has surged by 52.38% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- BLACKSTONE GROUP 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 two years. We feel that this trend should continue. During the past fiscal year, BLACKSTONE GROUP LP increased its bottom line by earning $1.98 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $1.98).
- 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 58.4% when compared to the same quarter one year prior, rising from $167.64 million to $265.62 million.
- You can view the full Blackstone Group Ratings Report.
- Our dividend calendar.