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." Exterran Partners (NASDAQ: EXLP) shares currently have a dividend yield of 7.80%. Exterran Partners, L.P., together with its subsidiaries, provides natural gas contract operations services to customers in the United States. The company has a P/E ratio of 28.79. The average volume for Exterran Partners has been 136,000 shares per day over the past 30 days. Exterran Partners has a market cap of $1.5 billion and is part of the energy industry. Shares are down 8.6% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Exterran Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.4%. Since the same quarter one year prior, revenues rose by 14.1%. 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 $45.40 million or 38.94% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 22.16%.
- 40.04% is the gross profit margin for EXTERRAN PARTNERS LP which we consider to be strong. Regardless of EXLP'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 5.73% trails the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Energy Equipment & Services industry and the overall market, EXTERRAN PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- EXTERRAN PARTNERS LP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, EXTERRAN PARTNERS LP increased its bottom line by earning $1.18 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 44.9% in earnings ($0.65 versus $1.18).
- You can view the full Exterran Partners Ratings Report.
- The gross profit margin for BLACKROCK KELSO CAPITAL CORP is rather high; currently it is at 59.66%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 77.50% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $52.83 million or 6.49% when compared to the same quarter last year. In addition, BLACKROCK KELSO CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -96.54%.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, BLACKROCK KELSO CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- BKCC, with its decline in revenue, slightly underperformed the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- BLACKROCK KELSO CAPITAL CORP's earnings per share declined by 25.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BLACKROCK KELSO CAPITAL CORP increased its bottom line by earning $1.20 versus $0.78 in the prior year. For the next year, the market is expecting a contraction of 31.1% in earnings ($0.83 versus $1.20).
- You can view the full BlackRock Kelso Capital Corporation Ratings Report.
- The revenue growth came in higher than the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 28.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WHITESTONE REIT 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 two years. We feel that this trend should continue. During the past fiscal year, WHITESTONE REIT increased its bottom line by earning $0.21 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus $0.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 149.9% when compared to the same quarter one year prior, rising from $0.95 million to $2.37 million.
- Net operating cash flow has significantly increased by 52.07% to $5.98 million when compared to the same quarter last year. In addition, WHITESTONE REIT has also vastly surpassed the industry average cash flow growth rate of -58.18%.
- You can view the full Whitestone REIT Ratings Report.
- Our dividend calendar.