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."New Source Energy Partners Dividend Yield: 15.00% New Source Energy Partners (NYSE: NSLP) shares currently have a dividend yield of 15.00%. New Source Energy Partners L.P. is engaged in the acquisition and development of oil and natural gas properties in the United States. The average volume for New Source Energy Partners has been 108,700 shares per day over the past 30 days. New Source Energy Partners has a market cap of $240.6 million and is part of the energy industry. Shares are down 30.7% 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 New Source Energy Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- 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 59.5% when compared to the same quarter one year ago, falling from -$1.99 million to -$3.17 million.
- NSLP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 29.98%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NEW SOURCE ENERGY PRTRS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- 47.05% is the gross profit margin for NEW SOURCE ENERGY PRTRS LP 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, NSLP's net profit margin of -5.61% significantly underperformed when compared to the industry average.
- NEW SOURCE ENERGY PRTRS LP has improved earnings per share by 18.2% 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, NEW SOURCE ENERGY PRTRS LP increased its bottom line by earning $2.92 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 98.8% in earnings ($0.04 versus $2.92).
- You can view the full New Source Energy Partners 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 25.7% when compared to the same quarter one year ago, falling from $0.31 million to $0.23 million.
- 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, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $7.64 million or 4.95% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, GLADSTONE COMMERCIAL CORP has marginally lower results.
- GOOD has underperformed the S&P 500 Index, declining 5.47% from its price level of one year ago. 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.
- GLADSTONE COMMERCIAL CORP has improved earnings per share by 16.7% in the most recent quarter compared to 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 COMMERCIAL CORP reported poor results of -$0.22 versus -$0.05 in the prior year. For the next year, the market is expecting a contraction of 311.4% in earnings (-$0.91 versus -$0.22).
- You can view the full Gladstone Commercial 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 Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 115.3% when compared to the same quarter one year ago, falling from -$41.30 million to -$88.90 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 Independent Power Producers & Energy Traders industry and the overall market, ATLANTIC POWER CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 4.70 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AT's quick ratio is somewhat strong at 1.35, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has decreased to $40.40 million or 12.36% when compared to the same quarter last year. Despite a decrease in cash flow ATLANTIC POWER CORP is still fairing well by exceeding its industry average cash flow growth rate of -45.67%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.45%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 117.64% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full Atlantic Power Ratings Report.
- Our dividend calendar.