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." Golar LNG Partners Dividend Yield: 8.60% Golar LNG Partners (NASDAQ: GMLP) shares currently have a dividend yield of 8.60%. Golar LNG Partners LP owns and operates floating storage regasification units (FSRUs) and liquefied natural gas (LNG) carriers in Brazil, the United Arab Emirates, Indonesia, and Kuwait. As of April 29, 2015, it had a fleet of six FSRUs and four LNG carriers. The company has a P/E ratio of 11.61. The average volume for Golar LNG Partners has been 161,800 shares per day over the past 30 days. Golar LNG Partners has a market cap of $1.2 billion and is part of the transportation industry. Shares are down 13.9% year-to-date as of the close of trading on Thursday. 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 Golar LNG Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow 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 rose by 13.9%. 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 return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOLAR LNG PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for GOLAR LNG PARTNERS LP is currently very high, coming in at 83.02%. Regardless of GMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GMLP's net profit margin of 31.30% significantly outperformed against the industry.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GMLP has underperformed the S&P 500 Index, declining 18.95% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The debt-to-equity ratio is very high at 2.93 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full Golar LNG Partners Ratings Report.