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." Cheniere Energy Partners (AMEX: CQP) shares currently have a dividend yield of 5.30%. Cheniere Energy Partners, L.P., through its subsidiary, Sabine Pass LNG, L.P., owns and operates the Sabine Pass liquefied natural gas (LNG) terminal located on the Sabine Pass deep water shipping channel, Louisiana. The average volume for Cheniere Energy Partners has been 308,900 shares per day over the past 30 days. Cheniere Energy Partners has a market cap of $1.8 billion and is part of the energy industry. Shares are up 11.5% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Cheniere Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- CQP's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 1.7%. 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 gross profit margin for CHENIERE ENERGY PARTNERS LP is currently very high, coming in at 79.69%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -103.73% is in-line with the industry average.
- 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.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 34.8% when compared to the same quarter one year ago, falling from -$51.73 million to -$69.73 million.
- Net operating cash flow has significantly decreased to -$0.46 million or 105.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Cheniere Energy Partners Ratings Report.