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."Tallgrass Energy Partners Dividend Yield: 4.20% Tallgrass Energy Partners (NYSE: TEP) shares currently have a dividend yield of 4.20%. Tallgrass Energy Partners, LP acquires, owns, develops, and operates various midstream energy assets in North America. The company operates through three segments: Natural Gas Transportation & Logistics; Crude Oil Transportation & Logistics; and Processing & Logistics. The company has a P/E ratio of 36.69. The average volume for Tallgrass Energy Partners has been 344,200 shares per day over the past 30 days. Tallgrass Energy Partners has a market cap of $2.4 billion and is part of the energy industry. Shares are up 11.9% year-to-date as of the close of trading on Monday. 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 Tallgrass Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 20.3%. Since the same quarter one year prior, revenues rose by 26.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems.
- Powered by its strong earnings growth of 60.60% and other important driving factors, this stock has surged by 41.48% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TALLGRASS ENERGY PRT LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has declined marginally to $32.20 million or 1.64% when compared to the same quarter last year. Despite a decrease in cash flow TALLGRASS ENERGY PRT LP is still fairing well by exceeding its industry average cash flow growth rate of -12.96%.
- You can view the full Tallgrass Energy Partners Ratings Report.
- The gross profit margin for PENNYMAC MORTGAGE INVEST TR is rather high; currently it is at 56.82%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PMT's net profit margin of 35.35% compares favorably to the industry average.
- The revenue fell significantly faster than the industry average of 10.1%. Since the same quarter one year prior, revenues fell by 35.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 49.7% when compared to the same quarter one year ago, falling from $52.70 million to $26.51 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, PENNYMAC MORTGAGE INVEST TR's return on equity is below that of both the industry average and the S&P 500.
- You can view the full PennyMac Mortgage Investment Ratings Report.
- The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 16.4%. 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 significantly increased by 139.87% to $48.91 million when compared to the same quarter last year. In addition, APOLLO INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -22.85%.
- The gross profit margin for APOLLO INVESTMENT CORP is rather high; currently it is at 69.96%. Regardless of AINV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AINV's net profit margin of -17.67% significantly underperformed when compared to 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 Capital Markets industry. The net income has significantly decreased by 118.4% when compared to the same quarter one year ago, falling from $105.74 million to -$19.45 million.
- 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. When compared to other companies in the Capital Markets industry and the overall market, APOLLO INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Apollo Investment Ratings Report.
- Our dividend calendar.