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."Sabine Royalty Dividend Yield: 7.10% Sabine Royalty (NYSE: SBR) shares currently have a dividend yield of 7.10%. Sabine Royalty Trust holds royalty and mineral interests in various oil and gas properties in the United States. The company has a P/E ratio of 9.38. The average volume for Sabine Royalty has been 26,000 shares per day over the past 30 days. Sabine Royalty has a market cap of $568.9 million and is part of the financial services industry. Shares are up 10% year-to-date as of the close of trading on Wednesday. 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 Sabine Royalty as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. 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:
- SBR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.96, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SABINE ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Despite the weak revenue results, SBR has outperformed against the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 12.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- SABINE ROYALTY TRUST's earnings per share declined by 13.7% in the most recent quarter compared to the same quarter a year ago. Stable Earnings per share over the past year indicate the company has sound management over its earnings and share float. During the past fiscal year, SABINE ROYALTY TRUST's EPS of $4.03 remained unchanged from the prior years' EPS of $4.03.
- Looking at the price performance of SBR's shares over the past 12 months, there is not much good news to report: the stock is down 28.45%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- You can view the full Sabine Royalty Ratings Report.
- The revenue growth greatly exceeded the industry average of 38.5%. Since the same quarter one year prior, revenues rose by 39.1%. 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.
- Net operating cash flow has declined marginally to $15.65 million or 2.96% when compared to the same quarter last year. Despite a decrease in cash flow of 2.96%, LRR ENERGY LP is still significantly exceeding the industry average of -53.34%.
- 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 1025.6% when compared to the same quarter one year ago, falling from $2.69 million to -$24.94 million.
- You can view the full LRR Energy Ratings Report.
- TSLX's revenue growth has slightly outpaced the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 12.7%. 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.
- The gross profit margin for TPG SPECIALTY LENDING INC is rather high; currently it is at 67.09%. Regardless of TSLX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TSLX's net profit margin of 64.85% significantly outperformed against the industry.
- Net operating cash flow has increased to -$77.25 million or 49.01% when compared to the same quarter last year. Despite an increase in cash flow of 49.01%, TPG SPECIALTY LENDING INC is still growing at a significantly lower rate than the industry average of 190.66%.
- TPG SPECIALTY LENDING INC's earnings per share declined by 26.2% in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 5.5% in earnings ($1.64 versus $1.73).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $25.35 million to $24.47 million.
- You can view the full TPG Specialty Lending Ratings Report.
- Our dividend calendar.