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."New Source Energy Partners (NYSE: NSLP) shares currently have a dividend yield of 9.20%. New Source Energy Partners L.P. is engaged in the acquisition and development of oil and natural gas properties in the United States. The average volume for New Source Energy Partners has been 75,100 shares per day over the past 30 days. New Source Energy Partners has a market cap of $343.9 million and is part of the energy industry. Shares are up 10% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates New Source Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive. Highlights from the ratings report include:
- NSLP's very impressive revenue growth greatly exceeded the industry average of 1.5%. Since the same quarter one year prior, revenues leaped by 193.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The gross profit margin for NEW SOURCE ENERGY PRTRS LP is rather high; currently it is at 63.73%. 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 -5.58% is in-line with the industry average.
- NSLP's debt-to-equity ratio of 0.70 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.91 is weak.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 9.6% when compared to the same quarter one year ago, dropping from -$1.40 million to -$1.53 million.
- You can view the full New Source Energy Partners Ratings Report.
- NGPC's revenue growth has slightly outpaced the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 16.1% when compared to the same quarter one year prior, going from -$7.61 million to -$6.38 million.
- NGP CAPITAL RESOURCES CO has improved earnings per share by 13.9% 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, NGP CAPITAL RESOURCES CO reported lower earnings of $0.19 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.19).
- NGPC has underperformed the S&P 500 Index, declining 5.78% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 Capital Markets industry and the overall market on the basis of return on equity, NGP CAPITAL RESOURCES CO underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full NGP Capital Resources Company Ratings Report.
- Net operating cash flow has increased to $183.10 million or 29.63% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.80%.
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- PENGROWTH ENERGY CORP 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PENGROWTH ENERGY CORP swung to a loss, reporting -$0.61 versus $0.04 in the prior year.
- 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 78.6% when compared to the same quarter one year ago, falling from -$65.05 million to -$116.20 million.
- You can view the full Pengrowth Energy Ratings Report.
- Our dividend calendar.