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 "Sell."Alon USA Partners (NYSE: ALDW) shares currently have a dividend yield of 14.70%. Alon USA Partners, LP refines and markets petroleum products primarily in the South Central and Southwestern regions of the United States. The company owns and operates a crude oil refinery in Big Spring, Texas with crude oil throughput capacity of 70,000 barrels per day. The company has a P/E ratio of 24.71. The average volume for Alon USA Partners has been 164,400 shares per day over the past 30 days. Alon USA Partners has a market cap of $1.2 billion and is part of the energy industry. Shares are up 12.7% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Alon USA Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, generally high debt management risk and poor profit margins. Highlights from the ratings report include:
- The share price of ALON USA PARTNERS LP has not done very well: it is down 6.80% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- ALON USA 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ALON USA PARTNERS LP reported lower earnings of $2.19 versus $3.74 in the prior year. For the next year, the market is expecting a contraction of 17.8% in earnings ($1.80 versus $2.19).
- 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 82.8% when compared to the same quarter one year ago, falling from $45.32 million to $7.80 million.
- The debt-to-equity ratio is very high at 2.43 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- The gross profit margin for ALON USA PARTNERS LP is currently extremely low, coming in at 4.86%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.07% trails that of the industry average.
- You can view the full Alon USA Partners Ratings Report.
- In its most recent trading session, STB 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. Along with this company's share value not moving any higher or lower since its value 12 months ago, we feel that there is very little room for future price appreciation.
- 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 Road & Rail industry and the overall market, STUDENT TRANSPORTATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for STUDENT TRANSPORTATION INC is rather low; currently it is at 23.71%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.88% significantly trails the industry average.
- Net operating cash flow has decreased to $11.81 million or 13.84% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Currently the debt-to-equity ratio of 1.74 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, STB's quick ratio is somewhat strong at 1.08, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Student Transportation Ratings Report.
- WHEELER REAL ESTATE INVT TR's earnings per share declined by 30.8% in the most recent quarter compared to 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, WHEELER REAL ESTATE INVT TR reported poor results of -$0.94 versus -$0.27 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 167.1% when compared to the same quarter one year ago, falling from -$0.43 million to -$1.16 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WHEELER REAL ESTATE INVT TR's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for WHEELER REAL ESTATE INVT TR is currently extremely low, coming in at 3.36%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -31.63% is significantly below that of the industry average.
- The share price of WHEELER REAL ESTATE INVT TR has not done very well: it is down 6.29% 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.
- You can view the full Wheeler Real Estate Investment Ratings Report.
- Our dividend calendar.