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." Alon USA Partners Dividend Yield: 14.60% Alon USA Partners (NYSE: ALDW) shares currently have a dividend yield of 14.60%. Alon USA Partners, LP refines and markets petroleum products primarily in the South Central and Southwestern regions of the United States. The company owns and operates a crude oil refinery in Big Spring, Texas with crude oil throughput capacity of 73,000 barrels per day. The company has a P/E ratio of 7.44. The average volume for Alon USA Partners has been 215,800 shares per day over the past 30 days. Alon USA Partners has a market cap of $1.2 billion and is part of the energy industry. Shares are up 50.4% year-to-date as of the close of trading on Monday. 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 Alon USA Partners as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALON USA PARTNERS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 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 36.7%. 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 $27.09 million or 40.16% when compared to the same quarter last year. Despite a decrease in cash flow ALON USA PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -53.28%.
- Currently the debt-to-equity ratio of 1.61 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, ALDW maintains a poor quick ratio of 0.80, which illustrates the inability to avoid short-term cash problems.
- You can view the full Alon USA Partners Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 2.9%. 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 APOLLO RESIDENTIAL MTG INC is currently very high, coming in at 83.11%. Regardless of AMTG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AMTG's net profit margin of 54.46% significantly outperformed against the industry.
- Net operating cash flow has decreased to $6.52 million or 46.99% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- 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 Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 23.2% when compared to the same quarter one year ago, dropping from $27.88 million to $21.41 million.
- You can view the full Apollo Residential Mortgage Ratings Report.
- ATAX's revenue growth has slightly outpaced the industry average of 9.0%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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 121.09% to $4.17 million when compared to the same quarter last year. In addition, AMERICA FIRST MULTIFAMILY-LP has also vastly surpassed the industry average cash flow growth rate of -231.74%.
- The gross profit margin for AMERICA FIRST MULTIFAMILY-LP is currently very high, coming in at 77.77%. Regardless of ATAX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ATAX's net profit margin of 18.96% compares favorably to the industry average.
- 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 Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, AMERICA FIRST MULTIFAMILY-LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The share price of AMERICA FIRST MULTIFAMILY-LP has not done very well: it is down 7.63% 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, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full America First Multifamily Investors Ratings Report.
- Our dividend calendar.