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." USA Compression Partners Dividend Yield: 8.00% USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 8.00%. USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. The company has a P/E ratio of 51.98. The average volume for USA Compression Partners has been 118,900 shares per day over the past 30 days. USA Compression Partners has a market cap of $737.6 million and is part of the energy industry. Shares are down 8.3% 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 USA Compression Partners as a sell. Among the areas we feel are negative, one of the most important has been very high debt management risk by most measures. Highlights from the ratings report include:
- Despite currently having a low debt-to-equity ratio of 0.53, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that USAC's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.53 is low and demonstrates weak liquidity.
- 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 Energy Equipment & Services industry and the overall market, USA COMPRESSION PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The gross profit margin for USA COMPRESSION PRTNRS LP is rather high; currently it is at 66.21%. Regardless of USAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, USAC's net profit margin of 14.11% compares favorably to the industry average.
- Net operating cash flow has increased to $21.60 million or 33.75% when compared to the same quarter last year. In addition, USA COMPRESSION PRTNRS LP has also modestly surpassed the industry average cash flow growth rate of 24.84%.
- You can view the full USA Compression Partners Ratings Report.
- Net operating cash flow has decreased to $18.33 million or 40.27% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- In its most recent trading session, AMTG 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. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, APOLLO RESIDENTIAL MTG INC's return on equity is below that of both the industry average and the S&P 500.
- AMTG, with its decline in revenue, underperformed when compared the industry average of 11.6%. Since the same quarter one year prior, revenues slightly dropped by 7.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- APOLLO RESIDENTIAL MTG INC 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, APOLLO RESIDENTIAL MTG INC swung to a loss, reporting -$1.91 versus $8.19 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus -$1.91).
- You can view the full Apollo Residential Mortgage Ratings Report.
- 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 Capital Markets industry. The net income has significantly decreased by 506.1% when compared to the same quarter one year ago, falling from $1.85 million to -$7.53 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Capital Markets industry and the overall market, FULL CIRCLE CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of FULL CIRCLE CAPITAL CORP has not done very well: it is down 20.73% 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.
- FULL CIRCLE CAPITAL CORP 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 reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP swung to a loss, reporting -$0.83 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus -$0.83).
- FULL, with its very weak revenue results, has greatly underperformed against the industry average of 2.5%. Since the same quarter one year prior, revenues plummeted by 246.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Full Circle Capital Ratings Report.
- Our dividend calendar.