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." Tesoro Logistics Dividend Yield: 4.90% Tesoro Logistics (NYSE: TLLP) shares currently have a dividend yield of 4.90%. Tesoro Logistics LP owns, operates, develops, and acquires logistics assets related to crude oil and refined products in the United States. It operates in three segments: Gathering, Processing, and Terminalling and Transportation. The company has a P/E ratio of 178.41. The average volume for Tesoro Logistics has been 291,900 shares per day over the past 30 days. Tesoro Logistics has a market cap of $4.6 billion and is part of the energy industry. Shares are down 2.5% 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 Tesoro Logistics as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins 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 feeble growth in the company's earnings per share. Highlights from the ratings report include:
- TLLP's very impressive revenue growth greatly exceeded the industry average of 38.3%. Since the same quarter one year prior, revenues leaped by 110.3%. 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 TESORO LOGISTICS LP is rather high; currently it is at 68.06%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.33% significantly outperformed against the industry average.
- 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 43.8% when compared to the same quarter one year prior, rising from $44.50 million to $64.00 million.
- TESORO LOGISTICS LP's earnings per share declined by 8.7% 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, TESORO LOGISTICS LP reported lower earnings of $1.14 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($2.63 versus $1.14).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TLLP has underperformed the S&P 500 Index, declining 16.07% 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 Tesoro Logistics Ratings Report.