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." Energy Transfer Partners (NYSE: ETP) shares currently have a dividend yield of 6.50%. Energy Transfer Partners, L.P. is engaged in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The average volume for Energy Transfer Partners has been 1,054,000 shares per day over the past 30 days. Energy Transfer Partners has a market cap of $18.7 billion and is part of the energy industry. Shares are up 2% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Energy Transfer Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year, increase in net income 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:
- The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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, 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.
- 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 28.9% when compared to the same quarter one year prior, rising from $322.00 million to $415.00 million.
- Net operating cash flow has significantly increased by 93.20% to $682.00 million when compared to the same quarter last year. In addition, ENERGY TRANSFER PARTNERS -LP has also vastly surpassed the industry average cash flow growth rate of 16.72%.
- ENERGY TRANSFER PARTNERS -LP has improved earnings per share by 15.0% 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, ENERGY TRANSFER PARTNERS -LP swung to a loss, reporting -$0.24 versus $5.76 in the prior year. This year, the market expects an improvement in earnings ($2.66 versus -$0.24).
- You can view the full Energy Transfer Partners Ratings Report.
- Powered by its strong earnings growth of 114.81% and other important driving factors, this stock has surged by 48.75% 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.
- NUSTAR ENERGY 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 year. We feel that this trend should continue. During the past fiscal year, NUSTAR ENERGY LP continued to lose money by earning -$2.89 versus -$3.05 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus -$2.89).
- 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 67.4% when compared to the same quarter one year prior, rising from $33.09 million to $55.40 million.
- NS, with its decline in revenue, underperformed when compared the industry average of 3.6%. Since the same quarter one year prior, revenues fell by 17.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for NUSTAR ENERGY LP is rather low; currently it is at 21.40%. Regardless of NS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NS's net profit margin of 7.38% compares favorably to the industry average.
- You can view the full NuStar Energy L.P Ratings Report.
- Net operating cash flow has increased to $13,984.00 million or 20.97% when compared to the same quarter last year. In addition, ROYAL DUTCH SHELL PLC has also modestly surpassed the industry average cash flow growth rate of 16.72%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- RDS.B's debt-to-equity ratio is very low at 0.25 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 0.82 is somewhat weak and could be cause for future problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Royal Dutch Shell Ratings Report.
- Our dividend calendar.