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."Permian Basin Royalty Dividend Yield: 9.00% Permian Basin Royalty (NYSE: PBT) shares currently have a dividend yield of 9.00%. Permian Basin Royalty Trust, an express trust, holds overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 6.76. The average volume for Permian Basin Royalty has been 110,000 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $321.6 million and is part of the energy industry. Shares are down 26.6% year-to-date as of the close of trading on Wednesday. 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 Permian Basin Royalty as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- PBT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, PBT has a quick ratio of 1.71, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 90.36% significantly outperformed against the industry.
- PERMIAN BASIN ROYALTY TRUST has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PERMIAN BASIN ROYALTY TRUST increased its bottom line by earning $1.02 versus $0.87 in the prior year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 51.17%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.00% compared to 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.
- 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 64.2% when compared to the same quarter one year ago, falling from $11.70 million to $4.18 million.
- You can view the full Permian Basin Royalty Ratings Report.
- CCLP's very impressive revenue growth greatly exceeded the industry average of 22.1%. Since the same quarter one year prior, revenues leaped by 245.1%. 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.
- Net operating cash flow has significantly increased by 100.08% to $32.48 million when compared to the same quarter last year. In addition, CSI COMPRESSCO LP has also vastly surpassed the industry average cash flow growth rate of -13.74%.
- 41.58% is the gross profit margin for CSI COMPRESSCO LP which we consider to be strong. Regardless of CCLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.75% trails the industry average.
- CSI COMPRESSCO LP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CSI COMPRESSCO LP reported lower earnings of $0.61 versus $1.11 in the prior year. For the next year, the market is expecting a contraction of 47.5% in earnings ($0.32 versus $0.61).
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 60.9% when compared to the same quarter one year ago, falling from $4.62 million to $1.81 million.
- You can view the full CSI Compressco Ratings Report.
- The revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 42.8%. 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 RESOURCE CAPITAL CORP is rather high; currently it is at 62.86%. Regardless of RSO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 27.32% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 11.5% when compared to the same quarter one year ago, dropping from $17.52 million to $15.49 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Resource Capital Ratings Report.
- Our dividend calendar.