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." NGL Energy Partners Dividend Yield: 7.90% NGL Energy Partners (NYSE: NGL) shares currently have a dividend yield of 7.90%. NGL Energy Partners LP, through its subsidiaries, is primarily engaged in the crude oil logistics, water solutions, liquids, and retail propane businesses in the United States. It operates through Crude Oil Logistics, Water Solutions, Liquids, and Retail Propane segments. The average volume for NGL Energy Partners has been 476,800 shares per day over the past 30 days. NGL Energy Partners has a market cap of $3.3 billion and is part of the energy industry. Shares are up 9% 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 NGL Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 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 105.0% when compared to the same quarter one year prior, rising from $42.33 million to $86.78 million.
- NGL ENERGY 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, NGL ENERGY PARTNERS LP swung to a loss, reporting -$0.39 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus -$0.39).
- Despite the weak revenue results, NGL has outperformed against the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 19.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NGL maintains a poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NGL ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full NGL Energy Partners Ratings Report.