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."Stonemor Partners Dividend Yield: 8.60% Stonemor Partners (NYSE: STON) shares currently have a dividend yield of 8.60%. StoneMor Partners L.P., together with its subsidiaries, owns and operates cemeteries in the United States. It operates through Cemetery Operations-Southeast, Cemetery Operations-Northeast, Cemetery Operations-West, and Funeral Homes segments. The average volume for Stonemor Partners has been 91,800 shares per day over the past 30 days. Stonemor Partners has a market cap of $876.0 million and is part of the diversified services industry. Shares are up 16.2% 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 Stonemor Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- STON's revenue growth has slightly outpaced the industry average of 0.5%. 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.
- Compared to its closing price of one year ago, STON's share price has jumped by 25.82%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- 46.53% is the gross profit margin for STONEMOR PARTNERS LP which we consider to be strong. Regardless of STON's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STON's net profit margin of -13.17% significantly underperformed when compared to the industry average.
- Currently the debt-to-equity ratio of 1.69 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, STON has managed to keep a strong quick ratio of 1.75, which demonstrates the ability to cover short-term cash needs.
- 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 Diversified Consumer Services industry. The net income has significantly decreased by 2271.9% when compared to the same quarter one year ago, falling from $0.41 million to -$8.88 million.
- You can view the full Stonemor Partners Ratings Report.
- The revenue growth greatly exceeded the industry average of 38.6%. Since the same quarter one year prior, revenues rose by 37.7%. 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 NATURAL RESOURCE PARTNERS LP is rather high; currently it is at 66.42%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NRP's net profit margin of 18.00% significantly outperformed against the industry.
- The debt-to-equity ratio is very high at 2.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.41, which clearly demonstrates the inability to cover short-term cash needs.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NATURAL RESOURCE PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Natural Resources Partners Ratings Report.
- The revenue growth came in higher than the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 12.2%. 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 significantly exceeded that of the S&P 500 and the Marine industry. The net income increased by 18.3% when compared to the same quarter one year prior, going from $18.03 million to $21.33 million.
- SEASPAN CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEASPAN CORP reported lower earnings of $0.78 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.78).
- SSW has underperformed the S&P 500 Index, declining 11.22% from its price level of one year ago. 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.
- Net operating cash flow has decreased to $64.37 million or 13.21% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, SEASPAN CORP has marginally lower results.
- You can view the full Seaspan Ratings Report.
- Our dividend calendar.