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: 9.50% CSI Compressco (NASDAQ: CCLP) shares currently have a dividend yield of 9.50%. CSI Compressco LP provides compression services and equipment for natural gas and oil production, gathering, transportation, processing, and storage applications in the United States, Latin America, Canada, and internationally. The company has a P/E ratio of 44.49. The average volume for CSI Compressco has been 164,300 shares per day over the past 30 days. CSI Compressco has a market cap of $693.1 million and is part of the energy industry. Shares are up 59.2% year-to-date as of the close of trading on Friday. 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 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- CCLP's very impressive revenue growth greatly exceeded the industry average of 2.6%. 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.
- Net operating cash flow has significantly increased by 118.69% to $13.48 million when compared to the same quarter last year. In addition, CSI COMPRESSCO LP has also vastly surpassed the industry average cash flow growth rate of 4.41%.
- 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.
- 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 $0.61 versus $1.11 in the prior year. For the next year, the market is expecting a contraction of 21.3% in earnings ($0.48 versus $0.61).
- 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.
- You can view the full CSI Compressco Ratings Report.
- LRE's very impressive revenue growth greatly exceeded the industry average of 20.3%. Since the same quarter one year prior, revenues leaped by 212.6%. 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 Oil, Gas & Consumable Fuels industry. The net income increased by 150.2% when compared to the same quarter one year prior, rising from -$62.09 million to $31.15 million.
- 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 on the basis of return on equity, LRR ENERGY LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- LRE'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 52.23%, 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 debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, LRE's quick ratio is somewhat strong at 1.09, demonstrating the ability to handle short-term liquidity needs.
- You can view the full LRR Energy Ratings Report.
- The revenue growth greatly exceeded the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 47.6%. 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 Chemicals industry. The net income increased by 145.1% when compared to the same quarter one year prior, rising from -$17.41 million to $7.84 million.
- RENTECH NITROGEN PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RENTECH NITROGEN PARTNERS LP swung to a loss, reporting -$0.03 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($1.46 versus -$0.03).
- 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 Chemicals industry and the overall market, RENTECH NITROGEN PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$13.28 million or 95.76% 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 Rentech Nitrogen Partners Ratings Report.
- Our dividend calendar.