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.