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." Niska Gas Storage Partners (NYSE: NKA) shares currently have a dividend yield of 9.90%. Niska Gas Storage Partners LLC owns and operates natural gas storage assets in North America. The average volume for Niska Gas Storage Partners has been 122,600 shares per day over the past 30 days. Niska Gas Storage Partners has a market cap of $510.6 million and is part of the utilities industry. Shares are down 1.6% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Niska Gas Storage Partners as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we find that net income has been generally deteriorating over time. Highlights from the ratings report include:
- The gross profit margin for NISKA GAS STORAGE PARTNERS is rather high; currently it is at 62.03%. 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 -34.25% is in-line with the industry average.
- NISKA GAS STORAGE PARTNERS 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, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.24 versus -$0.63 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus -$0.24).
- NKA, with its decline in revenue, slightly underperformed the industry average of 1.5%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, NKA has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 338.1% when compared to the same quarter one year ago, falling from $7.97 million to -$18.97 million.
- You can view the full Niska Gas Storage Partners Ratings Report.