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."Sabine Royalty Dividend Yield: 12.50% Sabine Royalty (NYSE: SBR) shares currently have a dividend yield of 12.50%. Sabine Royalty Trust holds royalty and mineral interests in various oil and gas properties in the United States. The company has a P/E ratio of 10.22. The average volume for Sabine Royalty has been 33,400 shares per day over the past 30 days. Sabine Royalty has a market cap of $619.8 million and is part of the financial services industry. Shares are up 18.3% year-to-date as of the close of trading on Tuesday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates Sabine Royalty as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 19.8%. Since the same quarter one year prior, revenues slightly increased by 6.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SBR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.63, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SABINE ROYALTY TRUST is currently very high, coming in at 100.00%. SBR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, SBR's net profit margin of 97.45% significantly outperformed against the industry.
- 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, SABINE ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- SBR has underperformed the S&P 500 Index, declining 12.59% 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.
- You can view the full Sabine Royalty Ratings Report.
- Net operating cash flow has increased to $22.43 million or 13.20% when compared to the same quarter last year. In addition, ARLINGTON ASSET INVESTMENT has also modestly surpassed the industry average cash flow growth rate of 6.53%.
- AI, with its very weak revenue results, has greatly underperformed against the industry average of 13.1%. Since the same quarter one year prior, revenues plummeted by 75.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ARLINGTON ASSET INVESTMENT 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ARLINGTON ASSET INVESTMENT reported lower earnings of $0.53 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($4.89 versus $0.53).
- 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 Capital Markets industry and the overall market, ARLINGTON ASSET INVESTMENT's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of ARLINGTON ASSET INVESTMENT has not done very well: it is down 7.60% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Arlington Asset Investment Ratings Report.
- CCLP's very impressive revenue growth greatly exceeded the industry average of 14.6%. Since the same quarter one year prior, revenues leaped by 284.7%. 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.
- 36.84% is the gross profit margin for CSI COMPRESSCO LP which we consider to be strong. Regardless of CCLP'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 3.49% trails the industry average.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Energy Equipment & Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 31.3% when compared to the same quarter one year ago, falling from $6.35 million to $4.36 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 32.20%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 60.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- CSI COMPRESSCO 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, CSI COMPRESSCO LP reported lower earnings of $0.66 versus $1.11 in the prior year. For the next year, the market is expecting a contraction of 19.7% in earnings ($0.53 versus $0.66).
- You can view the full CSI Compressco Ratings Report.
- Our dividend calendar.