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."Crestwood Equity Partners Dividend Yield: 10.70% Crestwood Equity Partners (NYSE: CEQP) shares currently have a dividend yield of 10.70%. Crestwood Equity Partners LP provides midstream solutions to customers in the crude oil, natural gas liquids (NGLs), and natural gas sectors of the energy industry in the United States. The company has a P/E ratio of 22.30. The average volume for Crestwood Equity Partners has been 588,300 shares per day over the past 30 days. Crestwood Equity Partners has a market cap of $956.4 million and is part of the energy industry. Shares are down 37.3% 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 Crestwood Equity Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, generally disappointing historical performance in the stock itself, poor profit margins 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 against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 57.6% when compared to the same quarter one year ago, falling from $19.60 million to $8.30 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 64.88%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 63.63% compared to the year-earlier quarter. 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.
- The debt-to-equity ratio is very high at 3.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, CEQP's quick ratio is somewhat strong at 1.05, demonstrating the ability to handle short-term liquidity needs.
- The gross profit margin for CRESTWOOD EQUITY PARTNERS LP is currently lower than what is desirable, coming in at 27.59%. Regardless of CEQP'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 1.13% trails the industry average.
- CRESTWOOD EQUITY 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CRESTWOOD EQUITY PARTNERS LP increased its bottom line by earning $0.32 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 9.4% in earnings ($0.29 versus $0.32).
- You can view the full Crestwood Equity Partners Ratings Report.
- EARN has underperformed the S&P 500 Index, declining 8.44% 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.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ELLINGTON RESIDENTIAL MTG's return on equity is below that of both the industry average and the S&P 500.
- EARN, with its decline in revenue, underperformed when compared the industry average of 8.5%. Since the same quarter one year prior, revenues fell by 14.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for ELLINGTON RESIDENTIAL MTG is currently very high, coming in at 86.23%. Regardless of EARN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EARN's net profit margin of 35.76% compares favorably to the industry average.
- You can view the full Ellington Residential Mortgage REIT Ratings Report.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 38.9% when compared to the same quarter one year ago, falling from $149.00 million to $91.00 million.
- The gross profit margin for ENABLE MIDSTREAM PARTNERS LP is currently lower than what is desirable, coming in at 28.73%. Regardless of ENBL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ENBL's net profit margin of 14.77% compares favorably to the industry average.
- ENABLE MIDSTREAM PARTNERS LP's earnings per share declined by 38.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ENABLE MIDSTREAM PARTNERS LP increased its bottom line by earning $1.27 versus $0.28 in the prior year. For the next year, the market is expecting a contraction of 27.6% in earnings ($0.92 versus $1.27).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 38.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.34 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full Enable Midstream Partners Ratings Report.
- Our dividend calendar.