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: 12.10% CVR Partners (NYSE: UAN) shares currently have a dividend yield of 12.10%. 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 12.86. The average volume for CVR Partners has been 244,100 shares per day over the past 30 days. CVR Partners has a market cap of $1.1 billion and is part of the chemicals industry. Shares are up 53.2% 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 revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 14.1%. Since the same quarter one year prior, revenues rose by 15.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels.
- 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. 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.
- Net operating cash flow has decreased to $25.40 million or 28.65% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CVR PARTNERS LP has marginally lower results.
- You can view the full CVR Partners Ratings Report.
- MCEP's very impressive revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues leaped by 134.2%. 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 debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MCEP has a quick ratio of 1.92, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for MID-CON ENERGY PARTNERS -LP is rather low; currently it is at 23.49%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 0.15% trails that of the industry average.
- You can view the full Mid-Con Energy Partners Ratings Report.
- The revenue growth came in higher than the industry average of 4.4%. Since the same quarter one year prior, revenues rose by 30.5%. 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 THL CREDIT INC is rather high; currently it is at 64.64%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 19.53% trails the industry average.
- Net operating cash flow has increased to -$54.38 million or 18.79% when compared to the same quarter last year. Despite an increase in cash flow of 18.79%, THL CREDIT INC is still growing at a significantly lower rate than the industry average of 141.93%.
- The share price of THL CREDIT INC has not done very well: it is down 8.49% 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. 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.
- 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 55.9% when compared to the same quarter one year ago, falling from $10.69 million to $4.72 million.
- You can view the full THL Credit Ratings Report.
- Our dividend calendar.