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."Atwood Oceanics Dividend Yield: 5.20% Atwood Oceanics (NYSE: ATW) shares currently have a dividend yield of 5.20%. Atwood Oceanics, Inc., an offshore drilling contractor, engages in the drilling and completion of exploratory and developmental oil and gas wells worldwide. The company has a P/E ratio of 3.15. The average volume for Atwood Oceanics has been 2,445,800 shares per day over the past 30 days. Atwood Oceanics has a market cap of $1.2 billion and is part of the energy industry. Shares are down 32.2% 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 Atwood Oceanics as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including 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 22.4%. Since the same quarter one year prior, revenues rose by 12.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, ATW has a quick ratio of 2.24, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, ATWOOD OCEANICS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- ATW'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 55.17%, 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.
- Net operating cash flow has decreased to $133.86 million or 22.51% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ATWOOD OCEANICS has marginally lower results.
- You can view the full Atwood Oceanics Ratings Report.
- The revenue growth greatly exceeded the industry average of 37.8%. Since the same quarter one year prior, revenues rose by 29.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The current debt-to-equity ratio, 0.44, 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 1.01, which illustrates the ability to avoid short-term cash problems.
- ENLINK MIDSTREAM PARTNERS LP reported flat earnings per share in the most recent quarter. 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, ENLINK MIDSTREAM PARTNERS LP increased its bottom line by earning $0.60 versus $0.00 in the prior year. For the next year, the market is expecting a contraction of 25.0% in earnings ($0.45 versus $0.60).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 60.2% when compared to the same quarter one year ago, falling from $49.20 million to $19.60 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENLINK MIDSTREAM PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full EnLink Midstream Partners Ratings Report.
- INTERSIL CORP reported significant earnings per share improvement 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, INTERSIL CORP increased its bottom line by earning $0.41 versus $0.03 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus $0.41).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 176.4% when compared to the same quarter one year prior, rising from $13.65 million to $37.72 million.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.4%. Since the same quarter one year prior, revenues fell by 10.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- ISIL has underperformed the S&P 500 Index, declining 19.52% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, INTERSIL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Intersil Corporation Ratings Report.
- Our dividend calendar.