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."Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 10.00%. StoneMor Partners L.P., together with its subsidiaries, owns and operates cemeteries in the United States. It operates through Cemetery Operations-Southeast, Cemetery Operations-Northeast, Cemetery Operations-West, and Funeral Homes segments. The average volume for Stonemor Partners has been 151,300 shares per day over the past 30 days. Stonemor Partners has a market cap of $706.4 million and is part of the diversified services industry. Shares are down 5.1% year-to-date as of the close of trading on Tuesday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreet Ratings rates Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- STON's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 8.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for STONEMOR PARTNERS LP is rather high; currently it is at 52.65%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, STON's net profit margin of 0.63% significantly trails the industry average.
- STONEMOR PARTNERS LP reported significant earnings per share improvement 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, STONEMOR PARTNERS LP reported poor results of -$0.88 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings (-$0.22 versus -$0.88).
- Net operating cash flow has significantly decreased to -$2.94 million or 142.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Diversified Consumer Services industry and the overall market, STONEMOR PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Stonemor Partners Ratings Report.
- RNO's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that RNO's debt-to-equity ratio is low, the quick ratio, which is currently 0.61, displays a potential problem in covering short-term cash needs.
- RNO, with its decline in revenue, underperformed when compared the industry average of 2.1%. Since the same quarter one year prior, revenues fell by 14.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, RNO 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. 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 RHINO RESOURCE PARTNERS LP is rather low; currently it is at 17.19%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -12.30% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $1.85 million or 89.99% 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 Rhino Resource Partners Ratings Report.
- The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 10.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 Capital Markets industry and the overall market, GLADSTONE CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- GLADSTONE CAPITAL CORP has improved earnings per share by 23.1% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GLADSTONE CAPITAL CORP turned its bottom line around by earning $1.53 versus -$0.38 in the prior year. For the next year, the market is expecting a contraction of 43.1% in earnings ($0.87 versus $1.53).
- The gross profit margin for GLADSTONE CAPITAL CORP is rather high; currently it is at 65.96%. Regardless of GLAD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GLAD's net profit margin of -22.52% significantly underperformed when compared to the industry average.
- Net operating cash flow has significantly decreased to -$10.72 million or 1241.10% 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 Gladstone Capital Ratings Report.
- Our dividend calendar.