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." Alliance Resource Partners Dividend Yield: 11.00% Alliance Resource Partners (NASDAQ: ARLP) shares currently have a dividend yield of 11.00%. Alliance Resource Partners, L.P. produces and markets coal primarily to utilities and industrial users in the United States. It operates through the Illinois Basin, Appalachia, White Oak, and Other and Corporate segments. The company has a P/E ratio of 5.25. The average volume for Alliance Resource Partners has been 300,200 shares per day over the past 30 days. Alliance Resource Partners has a market cap of $1.8 billion and is part of the metals & mining industry. Shares are down 44.6% year-to-date as of the close of trading on Tuesday. 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 Alliance Resource Partners as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 38.8%. Since the same quarter one year prior, revenues slightly increased by 3.4%. 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALLIANCE RESOURCE PTNRS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The debt-to-equity ratio is somewhat low, currently at 0.83, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that ARLP's debt-to-equity ratio is low, the quick ratio, which is currently 0.51, displays a potential problem in covering short-term cash needs.
- ALLIANCE RESOURCE PTNRS -LP's earnings per share declined by 16.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ALLIANCE RESOURCE PTNRS -LP increased its bottom line by earning $4.78 versus $3.22 in the prior year. For the next year, the market is expecting a contraction of 21.5% in earnings ($3.75 versus $4.78).
- Looking at the price performance of ARLP's shares over the past 12 months, there is not much good news to report: the stock is down 46.45%, 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. 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.
- You can view the full Alliance Resource Partners Ratings Report.
- The revenue growth greatly exceeded the industry average of 17.8%. Since the same quarter one year prior, revenues rose by 44.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 Metals & Mining industry and the overall market, HI-CRUSH PARTNERS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- HI-CRUSH PARTNERS LP has improved earnings per share by 22.4% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, HI-CRUSH PARTNERS LP increased its bottom line by earning $2.92 versus $2.08 in the prior year. For the next year, the market is expecting a contraction of 28.8% in earnings ($2.08 versus $2.92).
- The debt-to-equity ratio of 1.22 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, HCLP has managed to keep a strong quick ratio of 1.89, which demonstrates the ability to cover short-term cash needs.
- The gross profit margin for HI-CRUSH PARTNERS LP is currently lower than what is desirable, coming in at 34.73%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 23.19% has significantly outperformed against the industry average.
- You can view the full Hi-Crush Partners Ratings Report.
- The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels.
- CYD, with its decline in revenue, slightly underperformed the industry average of 11.5%. Since the same quarter one year prior, revenues fell by 18.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Machinery industry. The net income has significantly decreased by 41.3% when compared to the same quarter one year ago, falling from $28.95 million to $17.00 million.
- 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. In comparison to the other companies in the Machinery industry and the overall market, CHINA YUCHAI INTERNATIONAL'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 China Yuchai International Ratings Report.
- Our dividend calendar.