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." New Source Energy Partners Dividend Yield: 15.60% New Source Energy Partners (NYSE: NSLP) shares currently have a dividend yield of 15.60%. New Source Energy Partners L.P. acquires, owns, develops, and produces oil and natural gas properties in the United States. It operates through two segments, Exploration and Production, and Oilfield Services. The average volume for New Source Energy Partners has been 83,900 shares per day over the past 30 days. New Source Energy Partners has a market cap of $84.9 million and is part of the energy industry. Shares are down 29.7% year-to-date as of the close of trading on Tuesday. 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 New Source Energy Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 280.2% when compared to the same quarter one year ago, falling from $21.85 million to -$39.37 million.
- 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, NEW SOURCE ENERGY PRTRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 76.35%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 188.06% compared to the year-earlier 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.
- NEW SOURCE ENERGY PRTRS LP 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NEW SOURCE ENERGY PRTRS LP swung to a loss, reporting -$2.32 versus $2.92 in the prior year. This year, the market expects an improvement in earnings (-$1.05 versus -$2.32).
- 43.15% is the gross profit margin for NEW SOURCE ENERGY PRTRS LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NSLP's net profit margin of -71.62% significantly underperformed when compared to the industry average.
- You can view the full New Source Energy Partners Ratings Report.