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." Atlas Resource Partners Dividend Yield: 17.30% Atlas Resource Partners (NYSE: ARP) shares currently have a dividend yield of 17.30%. Atlas Resource Partners, L.P. operates as an independent developer and producer of natural gas, crude oil, and natural gas liquids in the United States. The company operates in three segments: Gas and Oil Production, Well Construction and Completion, and Other Partnership Management. The average volume for Atlas Resource Partners has been 827,900 shares per day over the past 30 days. Atlas Resource Partners has a market cap of $654.9 million and is part of the energy industry. Shares are down 29.8% year-to-date as of the close of trading on Friday. 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 Atlas Resource Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- Currently the debt-to-equity ratio of 1.61 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.47, which clearly demonstrates the inability to cover short-term cash 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ATLAS RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- ARP'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 61.78%, 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.
- ATLAS RESOURCE PARTNERS LP reported significant earnings per share improvement 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, ATLAS RESOURCE PARTNERS LP reported poor results of -$7.79 versus -$1.88 in the prior year. This year, the market expects an improvement in earnings (-$0.48 versus -$7.79).
- 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 895.8% when compared to the same quarter one year prior, rising from -$10.76 million to $85.64 million.
- You can view the full Atlas Resource Partners 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 Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RAIT FINANCIAL TRUST is rather low; currently it is at 19.46%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 0.92% significantly trails the industry average.
- RAS has underperformed the S&P 500 Index, declining 16.52% 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.
- RAIT FINANCIAL TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, RAIT FINANCIAL TRUST continued to lose money by earning -$3.88 versus -$4.58 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus -$3.88).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 108.7% when compared to the same quarter one year prior, rising from -$8.78 million to $0.76 million.
- You can view the full Rait Financial Ratings Report.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Computers & Peripherals industry average. The net income has significantly decreased by 27.5% when compared to the same quarter one year ago, falling from $1.08 million to $0.78 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CCUR has underperformed the S&P 500 Index, declining 19.56% from its price level of one year ago. 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.
- CONCURRENT COMPUTER CP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, CONCURRENT COMPUTER CP increased its bottom line by earning $2.04 versus $0.49 in the prior year.
- The revenue fell significantly faster than the industry average of 33.3%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for CONCURRENT COMPUTER CP is rather high; currently it is at 58.94%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CCUR's net profit margin of 4.58% significantly trails the industry average.
- You can view the full Concurrent Computer Ratings Report.
- Our dividend calendar.