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 Dividend Yield: 9.60% Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 9.60%. 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 166,000 shares per day over the past 30 days. Stonemor Partners has a market cap of $753.1 million and is part of the diversified services industry. Shares are up 1.7% 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 Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 14.6%. 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 51.44%. 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 -0.16% trails the industry average.
- Net operating cash flow has remained constant at $9.69 million with no significant change when compared to the same quarter last year. Even though STONEMOR PARTNERS LP's cash flow growth was minimal, the firm managed to surpass its industry's average growth rate of -110.62%.
- 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 Diversified Consumer Services industry and the overall market on the basis of return on equity, STONEMOR PARTNERS LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The debt-to-equity ratio of 1.04 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, STON has managed to keep a strong quick ratio of 1.72, which demonstrates the ability to cover short-term cash needs.
- You can view the full Stonemor Partners Ratings Report.
- GARS's very impressive revenue growth greatly exceeded the industry average of 1.0%. Since the same quarter one year prior, revenues leaped by 68.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 33.3% when compared to the same quarter one year prior, rising from $6.80 million to $9.06 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, GARRISON CAPITAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- GARRISON CAPITAL INC has improved earnings per share by 31.7% 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, GARRISON CAPITAL INC increased its bottom line by earning $1.42 versus $0.28 in the prior year. For the next year, the market is expecting a contraction of 11.3% in earnings ($1.26 versus $1.42).
- In its most recent trading session, GARS 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- You can view the full Garrison Capital Ratings Report.
- The revenue growth came in higher than the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 19.1%. 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.
- Net operating cash flow has increased to $11.11 million or 10.62% when compared to the same quarter last year. In addition, GLADSTONE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -227.20%.
- 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 Capital Markets industry and the overall market on the basis of return on equity, GLADSTONE CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- GLADSTONE 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings 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 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 879.8% when compared to the same quarter one year ago, falling from -$2.06 million to -$20.18 million.
- You can view the full Gladstone Capital Ratings Report.
- Our dividend calendar.