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." NuStar GP Holdings (NYSE: NSH) shares currently have a dividend yield of 5.00%. NuStar GP Holdings, LLC, through its ownership interests in NuStar Energy L.P., is engaged in the terminalling and storage of petroleum products; transportation of petroleum products and anhydrous ammonia; and marketing of petroleum products. The average volume for NuStar GP Holdings has been 213,800 shares per day over the past 30 days. NuStar GP Holdings has a market cap of $1.8 billion and is part of the energy industry. Shares are up 50.9% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates NuStar GP Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 24.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 27.58% and other important driving factors, this stock has surged by 67.33% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although NSH had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- 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 25.6% when compared to the same quarter one year prior, rising from $12.56 million to $15.77 million.
- The gross profit margin for NUSTAR GP HOLDINGS LLC is currently very high, coming in at 100.00%. NSH has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NSH's net profit margin of 94.19% significantly outperformed against the industry.
- NUSTAR GP HOLDINGS LLC has improved earnings per share by 27.6% 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, NUSTAR GP HOLDINGS LLC swung to a loss, reporting -$0.26 versus $0.05 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus -$0.26).
- You can view the full NuStar GP Holdings Ratings Report.