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." Ferrellgas Partners Dividend Yield: 10.00% Ferrellgas Partners (NYSE: FGP) shares currently have a dividend yield of 10.00%. Ferrellgas Partners, L.P. distributes and sells propane and related equipment and supplies primarily in the United States. The company transports propane to propane distribution locations, tanks on customers' premises, or to portable propane tanks delivered to retailers. The company has a P/E ratio of 43.59. The average volume for Ferrellgas Partners has been 400,300 shares per day over the past 30 days. Ferrellgas Partners has a market cap of $1.8 billion and is part of the energy industry. Shares are down 6.4% 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 Ferrellgas Partners as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and poor profit margins. Highlights from the ratings report include:
- Net operating cash flow has slightly increased to $181.36 million or 4.20% when compared to the same quarter last year. Despite an increase in cash flow, FERRELLGAS PARTNERS -LP's cash flow growth rate is still lower than the industry average growth rate of 24.93%.
- FGP, with its decline in revenue, slightly underperformed the industry average of 20.2%. Since the same quarter one year prior, revenues fell by 26.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FERRELLGAS PARTNERS -LP's earnings per share declined by 24.6% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FERRELLGAS PARTNERS -LP reported lower earnings of $0.40 versus $0.68 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus $0.40).
- 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 the Gas Utilities industry average. The net income has decreased by 21.1% when compared to the same quarter one year ago, dropping from $45.39 million to $35.81 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, FGP has underperformed the S&P 500 Index, declining 20.74% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Ferrellgas Partners Ratings Report.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Chemicals industry average. The net income increased by 15.5% when compared to the same quarter one year prior, going from -$58.00 million to -$49.00 million.
- TRONOX LTD has improved earnings per share by 17.6% 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, TRONOX LTD reported poor results of -$3.73 versus -$1.10 in the prior year. This year, the market expects an improvement in earnings (-$0.33 versus -$3.73).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.7%. Since the same quarter one year prior, revenues slightly dropped by 7.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has significantly decreased to -$65.00 million or 441.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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. Compared to other companies in the Chemicals industry and the overall market, TRONOX LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Tronox Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 570.8% when compared to the same quarter one year prior, rising from $2.40 million to $16.10 million.
- 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 1.17, which illustrates the ability to avoid short-term cash problems.
- CRESTWOOD MIDSTREAM PTNRS LP 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, CRESTWOOD MIDSTREAM PTNRS LP reported poor results of -$0.46 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$0.46).
- CMLP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 57.51%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, CRESTWOOD MIDSTREAM PTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Crestwood Midstream Partners Ratings Report.
- Our dividend calendar.