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."CVR Partners Dividend Yield: 12.20% CVR Partners (NYSE: UAN) shares currently have a dividend yield of 12.20%. CVR Partners, LP produces, distributes, and markets nitrogen fertilizer products in North America. It provides ammonia products for industrial and agricultural customers; and urea ammonium nitrate (UAN) products for agricultural customers. The company has a P/E ratio of 12.96. The average volume for CVR Partners has been 272,500 shares per day over the past 30 days. CVR Partners has a market cap of $985.7 million and is part of the chemicals industry. Shares are up 31.1% year-to-date as of the close of trading on Wednesday. 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 CVR Partners as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and good cash flow from operations. 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:
- The gross profit margin for CVR PARTNERS LP is rather high; currently it is at 50.13%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 33.33% significantly outperformed against the industry average.
- Net operating cash flow has increased to $39.26 million or 20.84% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.94%.
- UAN, with its decline in revenue, slightly underperformed the industry average of 4.8%. Since the same quarter one year prior, revenues fell by 11.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 Chemicals industry and the overall market on the basis of return on equity, CVR PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Looking at the price performance of UAN's shares over the past 12 months, there is not much good news to report: the stock is down 33.74%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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 CVR Partners Ratings Report.
- CPG's very impressive revenue growth greatly exceeded the industry average of 19.6%. Since the same quarter one year prior, revenues leaped by 135.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CRESCENT POINT ENERGY CORP 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. During the past fiscal year, CRESCENT POINT ENERGY CORP increased its bottom line by earning $1.19 versus $0.38 in the prior year.
- CPG's debt-to-equity ratio is very low at 0.29 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 0.39 is very weak and demonstrates a lack of ability to pay short-term obligations.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CRESCENT POINT ENERGY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- CPG'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 38.28%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full Crescent Point Energy Ratings Report.
- The revenue growth greatly exceeded the industry average of 13.2%. 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 gross profit margin for THL CREDIT INC is rather high; currently it is at 65.14%. Regardless of TCRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCRD's net profit margin of 51.02% significantly outperformed against the industry.
- 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. When compared to other companies in the Capital Markets industry and the overall market, THL CREDIT INC's return on equity is below that of both the industry average and the S&P 500.
- TCRD has underperformed the S&P 500 Index, declining 13.95% 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 THL Credit Ratings Report.
- Our dividend calendar.