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." Consolidated Communications Dividend Yield: 7.60% Consolidated Communications (NASDAQ: CNSL) shares currently have a dividend yield of 7.60%. Consolidated Communications Holdings, Inc., through its subsidiaries, provides various integrated communications services to residential and business clients. The company has a P/E ratio of 58.63. The average volume for Consolidated Communications has been 304,500 shares per day over the past 30 days. Consolidated Communications has a market cap of $1.0 billion and is part of the telecommunications industry. Shares are down 26.3% 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 Consolidated Communications as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 25.7%. 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 increased to $54.42 million or 24.49% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.32%.
- The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 59.68%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CNSL's net profit margin of -5.75% significantly underperformed when compared to the industry average.
- Although CNSL's debt-to-equity ratio of 4.24 is very high, it is currently less than that of the industry average. To add to this, CNSL has a quick ratio of 0.66, this demonstrates the lack of 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 Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Consolidated Communications Ratings Report.
- LRE's very impressive revenue growth greatly exceeded the industry average of 33.1%. 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 51.79%, 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 came in higher than the industry average of 4.4%. Since the same quarter one year prior, revenues rose by 27.8%. 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.
- The gross profit margin for WHITEHORSE FINANCE INC is rather high; currently it is at 60.36%. Regardless of WHF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WHF's net profit margin of 32.63% 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, WHITEHORSE FINANCE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has significantly decreased to -$67.95 million or 719.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 43.3% when compared to the same quarter one year ago, falling from $6.34 million to $3.59 million.
- You can view the full WhiteHorse Finance Ratings Report.
- Our dividend calendar.