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."LRR Energy Dividend Yield: 14.50% LRR Energy (NYSE: LRE) shares currently have a dividend yield of 14.50%. LRR Energy, L.P., through its subsidiary, LRE Operating, LLC, operates, acquires, exploits, and develops producing oil and natural gas properties in North America. The average volume for LRR Energy has been 177,000 shares per day over the past 30 days. LRR Energy has a market cap of $320.4 million and is part of the energy industry. Shares are down 20.7% 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 LRR Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- LRE's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 92.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for LRR ENERGY LP is currently very high, coming in at 83.04%. It has increased significantly from the same period last year. Along with this, the net profit margin of 54.21% significantly outperformed against the industry average.
- LRR ENERGY LP 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, LRR ENERGY LP reported poor results of -$1.90 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($1.11 versus -$1.90).
- 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 Oil, Gas & Consumable Fuels industry and the overall market, LRR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $16.63 million or 19.24% 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 LRR Energy Ratings Report.
- The gross profit margin for WHITEHORSE FINANCE INC is rather high; currently it is at 58.80%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, WHF's net profit margin of 49.24% significantly outperformed against the industry.
- WHF, with its decline in revenue, underperformed when compared the industry average of 1.2%. Since the same quarter one year prior, revenues fell by 16.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 Capital Markets industry and the overall market, WHITEHORSE FINANCE INC's return on equity is below that of both the industry average and the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, WHF has underperformed the S&P 500 Index, declining 17.64% 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.
- 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 decreased by 24.2% when compared to the same quarter one year ago, dropping from $6.02 million to $4.56 million.
- You can view the full WhiteHorse Finance Ratings Report.
- The revenue fell significantly faster than the industry average of 7.2%. Since the same quarter one year prior, revenues fell by 32.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite the current debt-to-equity ratio of 1.51, it is still below the industry average, suggesting that this level of debt is acceptable within the Real Estate Management & Development industry. Despite the fact that XIN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.63 is low and demonstrates weak liquidity.
- 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. In comparison to the other companies in the Real Estate Management & Development industry and the overall market, XINYUAN REAL ESTATE CO -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for XINYUAN REAL ESTATE CO -ADR is currently lower than what is desirable, coming in at 26.56%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.75% trails that of the industry average.
- You can view the full Xinyuan Real Estate Ratings Report.
- Our dividend calendar.