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.
- 44.89% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.40% trails the industry average.
- FTR, with its decline in revenue, slightly underperformed the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Compared to its closing price of one year ago, FTR's share price has jumped by 38.55%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Diversified Telecommunication Services industry average. The net income has decreased by 18.4% when compared to the same quarter one year ago, dropping from $48.14 million to $39.27 million.
- You can view the full Frontier Communications Ratings Report.
- The revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 47.8%. 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 increased to $53.70 million or 25.82% when compared to the same quarter last year. In addition, NORTHSTAR REALTY FINANCE CP has also vastly surpassed the industry average cash flow growth rate of -37.20%.
- NORTHSTAR REALTY FINANCE CP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, NORTHSTAR REALTY FINANCE CP continued to lose money by earning -$1.10 versus -$4.52 in the prior year. This year, the market expects an improvement in earnings ($2.08 versus -$1.10).
- The share price of NORTHSTAR REALTY FINANCE CP has not done very well: it is down 13.60% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 348.9% when compared to the same quarter one year ago, falling from $47.96 million to -$119.37 million.
- You can view the full Northstar Realty Finance Ratings Report.
- Our dividend calendar.