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." Scorpio Tankers Dividend Yield: 5.40% Scorpio Tankers (NYSE: STNG) shares currently have a dividend yield of 5.40%. Scorpio Tankers Inc., together with its subsidiaries, engages in the seaborne transportation of refined petroleum products and crude oil worldwide. The company has a P/E ratio of 34.44. The average volume for Scorpio Tankers has been 2,004,600 shares per day over the past 30 days. Scorpio Tankers has a market cap of $1.5 billion and is part of the transportation industry. Shares are up 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 Scorpio Tankers as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- STNG's very impressive revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues leaped by 109.4%. 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.
- The gross profit margin for SCORPIO TANKERS INC is rather high; currently it is at 57.50%. It has increased significantly from the same period last year. Along with this, the net profit margin of 25.32% significantly outperformed against the industry average.
- SCORPIO TANKERS INC's earnings per share declined by 10.7% 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, SCORPIO TANKERS INC increased its bottom line by earning $0.27 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($0.81 versus $0.27).
- The debt-to-equity ratio of 1.48 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, STNG maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, SCORPIO TANKERS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Scorpio Tankers Ratings Report.
- 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 12.8% when compared to the same quarter one year prior, going from $77.44 million to $87.32 million.
- PBF, with its decline in revenue, slightly underperformed the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 36.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- PBF ENERGY INC's earnings per share declined by 29.6% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PBF ENERGY INC swung to a loss, reporting -$0.03 versus $1.35 in the prior year. This year, the market expects an improvement in earnings ($3.81 versus -$0.03).
- The share price of PBF ENERGY INC has not done very well: it is down 7.80% 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.
- Net operating cash flow has decreased to $132.51 million or 49.14% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PBF ENERGY INC has marginally lower results.
- You can view the full PBF Energy Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.4%. Since the same quarter one year prior, revenues rose by 19.7%. 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.
- PDLI's debt-to-equity ratio of 0.98 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. Despite the fact that PDLI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.87 is high and demonstrates strong liquidity.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PDLI has underperformed the S&P 500 Index, declining 21.44% from its price level of one year ago. 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 compared to the Biotechnology industry average, but is greater than that of the S&P 500. The net income has decreased by 9.8% when compared to the same quarter one year ago, dropping from $61.09 million to $55.07 million.
- You can view the full PDL BioPharma Ratings Report.
- Our dividend calendar.