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."American Midstream Partners Dividend Yield: 10.40% American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 10.40%. American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas, fractionating natural gas liquids (NGLs), and storing specialty chemical products in the Gulf Coast and Southeast regions of the United States. The average volume for American Midstream Partners has been 51,100 shares per day over the past 30 days. American Midstream Partners has a market cap of $412.1 million and is part of the energy industry. Shares are down 10.6% 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 American Midstream Partners as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- AMERICAN MIDSTREAM PRTNRS LP has improved earnings per share by 47.2% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN MIDSTREAM PRTNRS LP continued to lose money by earning -$6.47 versus -$6.63 in the prior year. This year, the market expects an improvement in earnings ($0.55 versus -$6.47).
- 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 106.5% when compared to the same quarter one year prior, rising from $0.40 million to $0.83 million.
- The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
- AMID's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 37.45%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full American Midstream Partners Ratings Report.
- 39.23% is the gross profit margin for BLUEKNIGHT ENERGY PRTNRS LP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.72% trails the industry average.
- Despite the weak revenue results, BKEP has outperformed against the industry average of 38.6%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Net operating cash flow has decreased to $4.08 million or 34.37% when compared to the same quarter last year. Despite a decrease in cash flow BLUEKNIGHT ENERGY PRTNRS LP is still fairing well by exceeding its industry average cash flow growth rate of -53.28%.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BLUEKNIGHT ENERGY PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of BLUEKNIGHT ENERGY PRTNRS LP has not done very well: it is down 19.33% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Blueknight Energy Partners Ratings Report.
- NRT, with its decline in revenue, slightly underperformed the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 39.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 40.2% when compared to the same quarter one year ago, falling from $5.14 million to $3.07 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 47.81%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 41.07% compared to 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.
- NORTH EUROPEAN OIL RTY TR's earnings per share declined by 41.1% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, NORTH EUROPEAN OIL RTY TR reported lower earnings of $1.97 versus $2.26 in the prior year.
- You can view the full North European Oil Royalty Ratings Report.
- Our dividend calendar.