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."CSI Compressco Dividend Yield: 11.30% CSI Compressco (NASDAQ: CCLP) shares currently have a dividend yield of 11.30%. CSI Compressco LP provides compression-based production enhancement services for natural gas and oil exploration and production companies. Its production enhancement services are used in both conventional wellhead compression applications and unconventional compression applications. The company has a P/E ratio of 22.84. The average volume for CSI Compressco has been 185,000 shares per day over the past 30 days. CSI Compressco has a market cap of $567.7 million and is part of the energy industry. Shares are up 30.5% 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 CSI Compressco as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- CCLP's very impressive revenue growth greatly exceeded the industry average of 11.1%. Since the same quarter one year prior, revenues leaped by 220.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has slightly increased to $10.39 million or 8.36% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -1.69%.
- CCLP's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.75 is weak.
- 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 Energy Equipment & Services industry and the overall market, CSI COMPRESSCO LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CSI COMPRESSCO LP is currently lower than what is desirable, coming in at 34.88%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -2.71% trails that of the industry average.
- You can view the full CSI Compressco Ratings Report.
- The revenue growth greatly exceeded the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 30.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 59.65%. 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 27.80% trails the industry average.
- 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 46.6% when compared to the same quarter one year ago, falling from $24.12 million to $12.87 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, RESOURCE CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Resource Capital Ratings Report.
- The revenue growth greatly exceeded the industry average of 12.4%. Since the same quarter one year prior, revenues rose by 21.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 52.2% when compared to the same quarter one year prior, rising from $7.76 million to $11.81 million.
- 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 Capital Markets industry and the overall market on the basis of return on equity, THL CREDIT INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- THL CREDIT INC reported significant earnings per share improvement 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, THL CREDIT INC increased its bottom line by earning $1.45 versus $1.26 in the prior year. For the next year, the market is expecting a contraction of 3.4% in earnings ($1.40 versus $1.45).
- TCRD'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 25.73%, 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.
- You can view the full THL Credit Ratings Report.
- Our dividend calendar.