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 "Sell." Baytex Energy Dividend Yield: 5.30% Baytex Energy (NYSE: BTE) shares currently have a dividend yield of 5.30%. Baytex Energy Corp., an oil and gas company, engages in the acquisition, development, exploitation, and production of oil and natural gas in the Western Canadian Sedimentary Basin and the United States. The company offers heavy oil, light oil, condensate, and natural gas liquids. The average volume for Baytex Energy has been 1,060,700 shares per day over the past 30 days. Baytex Energy has a market cap of $3.1 billion and is part of the energy industry. Shares are up 11.9% year-to-date as of the close of trading on Monday. 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 Baytex Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- BAYTEX ENERGY CORP 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. During the past fiscal year, BAYTEX ENERGY CORP swung to a loss, reporting -$0.65 versus $1.32 in the prior year.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 467.7% when compared to the same quarter one year ago, falling from $47.84 million to -$175.92 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 57.53%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 373.68% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Despite the weak revenue results, BTE has outperformed against the industry average of 37.8%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Baytex Energy Ratings Report.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 305.6% when compared to the same quarter one year ago, falling from $16.80 million to -$34.54 million.
- The share price of HATTERAS FINANCIAL CORP has not done very well: it is down 9.39% 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HATTERAS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for HATTERAS FINANCIAL CORP is currently very high, coming in at 92.05%. Regardless of HTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTS's net profit margin of -33.26% significantly underperformed when compared to the industry average.
- HTS, with its decline in revenue, slightly underperformed the industry average of 8.5%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Hatteras Financial Ratings Report.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, LINNCO LLC's return on equity significantly trails that of both the industry average and the S&P 500.
- LNCO'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 57.06%, 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 change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 37.5% when compared to the same quarter one year ago, falling from -$926.97 million to -$1,274.44 million.
- LNCO, with its very weak revenue results, has greatly underperformed against the industry average of 37.8%. Since the same quarter one year prior, revenues plummeted by 627.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for LINNCO LLC is currently very high, coming in at 100.00%. LNCO has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, LNCO's net profit margin of 62.48% significantly outperformed against the industry.
- You can view the full LinnCo Ratings Report.
- Our dividend calendar.