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." PetroLogistics (NYSE: PDH) shares currently have a dividend yield of 10.40%. PetroLogistics LP owns and operates propane dehydrogenation facility that produces polymer grade and chemical grade propylene from propane in North America. The company offers propylene, hydrogen, and C4 mix/C5+ streams to petrochemical industry. The company has a P/E ratio of 12.18. The average volume for PetroLogistics has been 615,200 shares per day over the past 30 days. PetroLogistics has a market cap of $2.0 billion and is part of the chemicals industry. Shares are up 22% year-to-date as of the close of trading on Monday. TheStreet Ratings rates PetroLogistics as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 5.4%. 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.
- 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 Chemicals industry and the overall market, PETROLOGISTICS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 70.89% to $48.56 million when compared to the same quarter last year. In addition, PETROLOGISTICS LP has also vastly surpassed the industry average cash flow growth rate of 0.29%.
- 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- PETROLOGISTICS LP's earnings per share declined by 19.5% 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, PETROLOGISTICS LP turned its bottom line around by earning $1.24 versus -$0.41 in the prior year. This year, the market expects an improvement in earnings ($1.39 versus $1.24).
- You can view the full PetroLogistics Ratings Report.
- FGP's revenue growth trails the industry average of 35.9%. Since the same quarter one year prior, revenues rose by 19.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has increased to $174.04 million or 40.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.31%.
- FERRELLGAS PARTNERS -LP's earnings per share improvement from the most recent quarter was slightly positive. 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, FERRELLGAS PARTNERS -LP turned its bottom line around by earning $0.68 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.68).
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Gas Utilities industry average, but is greater than that of the S&P 500. The net income increased by 1.6% when compared to the same quarter one year prior, going from $44.68 million to $45.39 million.
- You can view the full Ferrellgas Partners Ratings Report.
- HRZN's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 2.3%. 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 Capital Markets industry. The net income increased by 72.0% when compared to the same quarter one year prior, rising from $2.98 million to $5.13 million.
- Net operating cash flow has significantly increased by 71.57% to -$5.23 million when compared to the same quarter last year. In addition, HORIZON TECHNOLOGY FINANCE has also vastly surpassed the industry average cash flow growth rate of -97.00%.
- The gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 60.45%. Regardless of HRZN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HRZN's net profit margin of 68.09% significantly outperformed against the industry.
- HORIZON TECHNOLOGY FINANCE reported significant earnings per share improvement 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, HORIZON TECHNOLOGY FINANCE reported lower earnings of $0.37 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($1.23 versus $0.37).
- You can view the full Horizon Technology Finance Ratings Report.
- Our dividend calendar.