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."Hugoton Royalty Dividend Yield: 9.80% Hugoton Royalty (NYSE: HGT) shares currently have a dividend yield of 9.80%. Hugoton Royalty Trust operates as an express trust in the United States. The company holds an 80% net profits interests in certain natural gas producing working interest properties of XTO Energy Inc. XTO Energy Inc. The company has a P/E ratio of 9.19. The average volume for Hugoton Royalty has been 234,400 shares per day over the past 30 days. Hugoton Royalty has a market cap of $393.2 million and is part of the energy industry. Shares are up 30.7% year-to-date as of the close of trading on Wednesday. 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 Hugoton Royalty as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in stock price during the past year and compelling growth in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- HGT's very impressive revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues leaped by 74.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- HGT 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.
- 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, HUGOTON ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 93.9% when compared to the same quarter one year prior, rising from $9.21 million to $17.85 million.
- You can view the full Hugoton Royalty Ratings Report.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- LEGACY RESERVES 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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LEGACY RESERVES LP swung to a loss, reporting -$0.62 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$0.62).
- LGCY, with its decline in revenue, underperformed when compared the industry average of 3.5%. Since the same quarter one year prior, revenues fell by 26.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 46.26% is the gross profit margin for LEGACY RESERVES LP which we consider to be strong. Regardless of LGCY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LGCY's net profit margin of -15.59% significantly underperformed when compared to the industry average.
- Net operating cash flow has decreased to $43.60 million or 35.30% 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.
- You can view the full Legacy Reserves Ratings Report.
- SMTP's revenue growth trails the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- SMTP 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 25.02, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SMTP INC is currently very high, coming in at 82.68%. 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 14.96% trails the industry average.
- SMTP's share price has surged by 25.68% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SMTP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full SMTP Ratings Report.
- Our dividend calendar.