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." USA Compression Partners Dividend Yield: 9.10% USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 9.10%. USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. It engineers, designs, operates, services, and repairs its compression units and maintains related support inventory and equipment. The company has a P/E ratio of 37.80. The average volume for USA Compression Partners has been 88,500 shares per day over the past 30 days. USA Compression Partners has a market cap of $726.6 million and is part of the energy industry. Shares are up 36.7% year-to-date as of the close of trading on Thursday. 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 USA Compression Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 25.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- USA COMPRESSION PRTNRS LP 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, USA COMPRESSION PRTNRS LP increased its bottom line by earning $0.58 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.58).
- USAC's debt-to-equity ratio of 0.71 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.34 is very low and demonstrates very weak liquidity.
- USAC has underperformed the S&P 500 Index, declining 17.43% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full USA Compression Partners Ratings Report.
- The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 25.6%. 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 ELLINGTON FINANCIAL LLC is currently very high, coming in at 75.49%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EFC's net profit margin of 9.14% significantly trails the industry average.
- ELLINGTON FINANCIAL LLC 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, ELLINGTON FINANCIAL LLC reported lower earnings of $2.23 versus $3.46 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $2.23).
- 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 82.3% when compared to the same quarter one year ago, falling from $14.86 million to $2.64 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, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ellington Financial Ratings Report.
- The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 25.8%. 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 increased to -$42.35 million or 22.43% when compared to the same quarter last year. Despite an increase in cash flow, MEDLEY CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 55.98%.
- 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 on the basis of return on equity, MEDLEY CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.57%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 186.11% 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.
- You can view the full Medley Capital Ratings Report.
- Our dividend calendar.