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."American Midstream Partners Dividend Yield: 10.10% American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 10.10%. American Midstream Partners, LP is engaged in gathering, treating, processing, and transporting natural gas primarily in the Gulf Coast and Southeast regions of the United States. The average volume for American Midstream Partners has been 81,600 shares per day over the past 30 days. American Midstream Partners has a market cap of $295.6 million and is part of the energy industry. Shares are down 10.9% 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 American Midstream Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for AMERICAN MIDSTREAM PRTNRS LP is currently extremely low, coming in at 7.85%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.49% is significantly below that of the industry average.
- AMID'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 29.69%, 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, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- AMID, with its decline in revenue, slightly underperformed the industry average of 6.6%. Since the same quarter one year prior, revenues slightly dropped by 9.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- AMID's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full American Midstream Partners Ratings Report.
- RHINO RESOURCE PARTNERS LP 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, RHINO RESOURCE PARTNERS LP reported lower earnings of $0.29 versus $1.42 in the prior year. For the next year, the market is expecting a contraction of 444.8% in earnings (-$1.00 versus $0.29).
- 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 409.5% when compared to the same quarter one year ago, falling from $2.88 million to -$8.91 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 Oil, Gas & Consumable Fuels industry and the overall market, RHINO RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RHINO RESOURCE PARTNERS LP is currently extremely low, coming in at 14.02%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -14.51% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $3.67 million or 67.09% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Rhino Resource 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 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 -42.34%.
- The share price of ATLANTIC POWER CORP has not done very well: it is down 23.57% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- You can view the full Atlantic Power Ratings Report.
- Our dividend calendar.