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." USA Compression Partners Dividend Yield: 9.90% USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 9.90%. USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. It engineers, designs, operates, services, and repairs its compression units and maintains related support inventory and equipment. The company has a P/E ratio of 28.00. The average volume for USA Compression Partners has been 81,300 shares per day over the past 30 days. USA Compression Partners has a market cap of $665.6 million and is part of the energy industry. Shares are up 25.8% 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 USA Compression Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 29.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- USA COMPRESSION PRTNRS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, USA COMPRESSION PRTNRS LP increased its bottom line by earning $0.58 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus $0.58).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 192.6% when compared to the same quarter one year prior, rising from $3.92 million to $11.46 million.
- The gross profit margin for USA COMPRESSION PRTNRS LP is currently very high, coming in at 70.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.62% significantly outperformed against the industry average.
- Net operating cash flow has increased to $14.51 million or 44.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.31%.
- You can view the full USA Compression Partners Ratings Report.
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 28.0%. 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 significantly increased by 149.76% to $10.67 million when compared to the same quarter last year. Despite an increase in cash flow, TRIANGLE CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 189.33%.
- The gross profit margin for TRIANGLE CAPITAL CORP is currently very high, coming in at 78.68%. Regardless of TCAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCAP's net profit margin of 27.14% compares favorably to the industry average.
- TRIANGLE CAPITAL CORP's earnings per share declined by 44.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TRIANGLE CAPITAL CORP reported lower earnings of $1.04 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($2.12 versus $1.04).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Capital Markets industry average. The net income has significantly decreased by 33.2% when compared to the same quarter one year ago, falling from $12.50 million to $8.35 million.
- You can view the full Triangle Capital Corporation Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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 PENNANTPARK FLOATING RT CAP is rather high; currently it is at 65.54%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 76.72% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 171.73% to $21.67 million when compared to the same quarter last year. Despite an increase in cash flow, PENNANTPARK FLOATING RT CAP's cash flow growth rate is still lower than the industry average growth rate of 189.33%.
- In its most recent trading session, PFLT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- PENNANTPARK FLOATING RT CAP's earnings per share declined by 16.3% 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, PENNANTPARK FLOATING RT CAP increased its bottom line by earning $1.38 versus $1.30 in the prior year. For the next year, the market is expecting a contraction of 6.5% in earnings ($1.29 versus $1.38).
- You can view the full PennantPark Floating Rate Capital Ratings Report.
- Our dividend calendar.