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." Sabine Royalty (NYSE: SBR) shares currently have a dividend yield of 8.20%. Sabine Royalty Trust holds royalty and mineral interests in various oil and gas properties in the United States. The company has a P/E ratio of 14.45. The average volume for Sabine Royalty has been 28,200 shares per day over the past 30 days. Sabine Royalty has a market cap of $821.5 million and is part of the financial services industry. Shares are up 12.8% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Sabine Royalty as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- SBR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.00, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SABINE ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for SABINE ROYALTY TRUST is currently very high, coming in at 100.00%. SBR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, SBR's net profit margin of 95.58% significantly outperformed against the industry.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- SABINE ROYALTY TRUST's earnings per share declined by 12.6% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SABINE ROYALTY TRUST increased its bottom line by earning $4.03 versus $3.59 in the prior year.
- You can view the full Sabine Royalty Ratings Report.
- SPH's revenue growth has slightly outpaced the industry average of 22.7%. Since the same quarter one year prior, revenues rose by 28.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SUBURBAN PROPANE PRTNRS -LP has improved earnings per share by 9.3% 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 year. We feel that this trend should continue. During the past fiscal year, SUBURBAN PROPANE PRTNRS -LP increased its bottom line by earning $1.44 versus $0.48 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $1.44).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Gas Utilities industry average. The net income increased by 15.5% when compared to the same quarter one year prior, going from $129.49 million to $149.55 million.
- The debt-to-equity ratio of 1.05 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, SPH has managed to keep a strong quick ratio of 1.79, which demonstrates the ability to cover short-term cash needs.
- You can view the full Suburban Propane Partners Ratings Report.
- The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 22.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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, PENNANTPARK INVESTMENT CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 66.36%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 107.39% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 50.8% when compared to the same quarter one year prior, rising from $26.97 million to $40.68 million.
- PENNANTPARK INVESTMENT CORP has improved earnings per share by 48.8% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PENNANTPARK INVESTMENT CORP increased its bottom line by earning $1.39 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 18.0% in earnings ($1.14 versus $1.39).
- You can view the full Pennant Park Investment Corporation Ratings Report.
- Our dividend calendar.