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 "Buy." Energy Transfer Partners Dividend Yield: 7.20% Energy Transfer Partners (NYSE: ETP) shares currently have a dividend yield of 7.20%. Energy Transfer Partners, L.P. engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company has a P/E ratio of 87.00. The average volume for Energy Transfer Partners has been 2,206,600 shares per day over the past 30 days. Energy Transfer Partners has a market cap of $28.2 billion and is part of the energy industry. Shares are down 13.5% 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 Energy Transfer Partners as a buy. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- ENERGY TRANSFER PARTNERS -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. 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, ENERGY TRANSFER PARTNERS -LP turned its bottom line around by earning $1.65 versus -$0.24 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.65).
- Despite the weak revenue results, ETP has outperformed against the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENERGY TRANSFER PARTNERS -LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for ENERGY TRANSFER PARTNERS -LP is currently extremely low, coming in at 10.55%. Regardless of ETP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.94% trails the industry average.
- Net operating cash flow has decreased to $506.00 million or 25.80% when compared to the same quarter last year. Despite a decrease in cash flow ENERGY TRANSFER PARTNERS -LP is still fairing well by exceeding its industry average cash flow growth rate of -53.17%.
- You can view the full Energy Transfer Partners Ratings Report.