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." Calumet Specialty Products Partners (NASDAQ: CLMT) shares currently have a dividend yield of 9.30%. Calumet Specialty Products Partners, L.P. produces and sells specialty hydrocarbon products in North America. It operates in two segments, Specialty Products and Fuel Products. The average volume for Calumet Specialty Products Partners has been 298,600 shares per day over the past 30 days. Calumet Specialty Products Partners has a market cap of $2.0 billion and is part of the energy industry. Shares are up 15% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Calumet Specialty Products Partners as a hold. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk. Highlights from the ratings report include:
- CLMT's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 6.0%. 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.
- The share price of CALUMET SPECIALTY PRODS -LP has not done very well: it is down 8.83% 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.
- CALUMET SPECIALTY PRODS -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 two years. We anticipate that this should continue in the coming year. During the past fiscal year, CALUMET SPECIALTY PRODS -LP swung to a loss, reporting -$0.10 versus $3.53 in the prior year. For the next year, the market is expecting a contraction of 70.0% in earnings (-$0.17 versus -$0.10).
- The gross profit margin for CALUMET SPECIALTY PRODS -LP is currently extremely low, coming in at 9.37%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.57% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$103.70 million or 251.38% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Calumet Specialty Products Partners Ratings Report.