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."Regency Energy Partners Dividend Yield: 6.60% Regency Energy Partners (NYSE: RGP) shares currently have a dividend yield of 6.60%. Regency Energy Partners LP is engaged in the gathering and processing, compression, treating, and transportation of natural gas; and the transportation, fractionation, and storage of natural gas liquids (NGLs). The company has a P/E ratio of 349.44. The average volume for Regency Energy Partners has been 795,200 shares per day over the past 30 days. Regency Energy Partners has a market cap of $11.9 billion and is part of the energy industry. Shares are up 13.9% year-to-date as of the close of trading on Friday. 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 Regency Energy Partners as a hold. 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 and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- RGP's very impressive revenue growth greatly exceeded the industry average of 2.8%. Since the same quarter one year prior, revenues leaped by 84.3%. 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 debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.71 is somewhat weak and could be cause for future problems.
- Net operating cash flow has decreased to $90.00 million or 29.68% 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.
- 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 180.0% when compared to the same quarter one year ago, falling from $10.00 million to -$8.00 million.
- You can view the full Regency Energy Partners Ratings Report.
- MAA's very impressive revenue growth greatly exceeded the industry average of 11.4%. Since the same quarter one year prior, revenues leaped by 88.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- 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 on the basis of return on equity, MID-AMERICA APT CMNTYS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for MID-AMERICA APT CMNTYS INC is currently lower than what is desirable, coming in at 26.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 12.72% significantly trails the industry average.
- You can view the full Mid-America Apartment Communities Ratings Report.
- Net operating cash flow has significantly increased by 112.18% to $481.15 million when compared to the same quarter last year. In addition, LINN ENERGY LLC has also vastly surpassed the industry average cash flow growth rate of -4.80%.
- 46.13% is the gross profit margin for LINN ENERGY LLC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, LINE's net profit margin of -34.82% significantly underperformed when compared to the industry average.
- Currently the debt-to-equity ratio of 1.87 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, LINE has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, LINN ENERGY LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Linn Energy Ratings Report.
- Our dividend calendar.