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." Atlas Resource Partners Dividend Yield: 13.80% Atlas Resource Partners (NYSE: ARP) shares currently have a dividend yield of 13.80%. Atlas Resource Partners, L.P. operates as an independent developer and producer of natural gas, crude oil, and natural gas liquids in the United States. The company operates in three segments: Gas and Oil Production, Well Construction and Completion, and Other Partnership Management. The average volume for Atlas Resource Partners has been 616,100 shares per day over the past 30 days. Atlas Resource Partners has a market cap of $1.4 billion and is part of the energy industry. Shares are down 17.9% year-to-date as of the close of trading on Monday. 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 Atlas Resource Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has decreased to $24.93 million or 44.76% 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.
- ARP has underperformed the S&P 500 Index, declining 13.68% 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 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 Oil, Gas & Consumable Fuels industry and the overall market, ATLAS RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- 46.17% is the gross profit margin for ATLAS RESOURCE PARTNERS 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, the net profit margin of 0.53% trails the industry average.
- The debt-to-equity ratio is somewhat low, currently at 0.98, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that ARP's debt-to-equity ratio is low, the quick ratio, which is currently 0.59, displays a potential problem in covering short-term cash needs.
- You can view the full Atlas Resource Partners Ratings Report.
- The debt-to-equity ratio of 1.06 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.43, which clearly demonstrates the inability to cover short-term cash needs.
- CRK'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 30.42%, 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. 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.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, COMSTOCK RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- COMSTOCK RESOURCES INC 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, COMSTOCK RESOURCES INC reported poor results of -$2.29 versus -$2.23 in the prior year. This year, the market expects an improvement in earnings ($0.03 versus -$2.29).
- The gross profit margin for COMSTOCK RESOURCES INC is currently very high, coming in at 82.50%. 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 -1.31% trails the industry average.
- You can view the full Comstock Resources Ratings Report.
- The debt-to-equity ratio is very high at 2.11 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.41, which clearly demonstrates the inability to cover short-term cash needs.
- 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, ENERGY XXI (BERMUDA)'s return on equity significantly trails that of both the industry average and the S&P 500.
- ENERGY XXI (BERMUDA) 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ENERGY XXI (BERMUDA) reported lower earnings of $0.61 versus $1.84 in the prior year. For the next year, the market is expecting a contraction of 135.2% in earnings (-$0.22 versus $0.61).
- 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 114.8% when compared to the same quarter one year ago, falling from $43.14 million to -$6.40 million.
- The gross profit margin for ENERGY XXI (BERMUDA) is rather high; currently it is at 62.41%. Regardless of EXXI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.58% trails the industry average.
- You can view the full Energy XXI Ratings Report.
- Our dividend calendar.