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."Azure Midstream Partners Dividend Yield: 9.00% Azure Midstream Partners (NYSE: FISH) shares currently have a dividend yield of 9.00%. Azure Midstream Partners, LP acquires, owns, develops, and operates midstream energy assets in the United States. It operates through two segments, Gathering and Processing; and Logistics. The company has a P/E ratio of 13.44. The average volume for Azure Midstream Partners has been 73,500 shares per day over the past 30 days. Azure Midstream Partners has a market cap of $152.0 million and is part of the energy industry. Shares are down 12.6% 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 Azure Midstream Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 38.6%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 1.4% when compared to the same quarter one year prior, going from -$1.29 million to -$1.27 million.
- The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
- The gross profit margin for AZURE MIDSTREAM PARTNERS LP is currently lower than what is desirable, coming in at 28.94%. Regardless of FISH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, FISH's net profit margin of -9.89% significantly underperformed when compared to the industry average.
- Net operating cash flow has significantly decreased to -$2.60 million or 129.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Azure Midstream Partners Ratings Report.
- The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 64.98%. Regardless of FSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSC's net profit margin of 37.27% significantly outperformed against the industry.
- Net operating cash flow has significantly increased by 161.67% to $173.18 million when compared to the same quarter last year. Despite an increase in cash flow, FIFTH STREET FINANCE CORP's cash flow growth rate is still lower than the industry average growth rate of 191.13%.
- FSC, with its decline in revenue, underperformed when compared the industry average of 5.7%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, FIFTH STREET FINANCE CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Looking at the price performance of FSC's shares over the past 12 months, there is not much good news to report: the stock is down 27.61%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full Fifth Street Finance Corporation Ratings Report.
- The revenue growth greatly exceeded the industry average of 38.6%. Since the same quarter one year prior, revenues slightly increased by 2.6%. 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 current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARC LOGISTICS PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 92.85% 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 company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 83.7% when compared to the same quarter one year ago, falling from $1.86 million to $0.30 million.
- You can view the full Arc Logistics Partners Ratings Report.
- Our dividend calendar.