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."China Petroleum & Chemical Dividend Yield: 4.80% China Petroleum & Chemical (NYSE: SNP) shares currently have a dividend yield of 4.80%. China Petroleum & Chemical Corporation, an energy and chemical company, through its subsidiaries, engages in the oil and gas, and chemical operations and businesses in the People's Republic of China. The company has a P/E ratio of 15.15. The average volume for China Petroleum & Chemical has been 143,200 shares per day over the past 30 days. China Petroleum & Chemical has a market cap of $88.0 billion and is part of the energy industry. Shares are down 6.6% year-to-date as of the close of trading on Monday. 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 China Petroleum & Chemical as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.32 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 34.8%. Since the same quarter one year prior, revenues fell by 25.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for CHINA PETROLEUM & CHEM CORP is currently extremely low, coming in at 9.79%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.45% trails that of the industry average.
- Net operating cash flow has decreased to $1,077.92 million or 46.90% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full China Petroleum & Chemical Ratings Report.
- Net operating cash flow has increased to $209.80 million or 49.43% when compared to the same quarter last year. In addition, TARGA RESOURCES PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -21.91%.
- The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
- Despite the weak revenue results, NGLS has outperformed against the industry average of 34.8%. Since the same quarter one year prior, revenues fell by 15.1%. 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 against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 57.9% when compared to the same quarter one year ago, falling from $108.80 million to $45.80 million.
- 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, TARGA RESOURCES 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 Targa Resources Partners Ratings Report.
- RY's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 4.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ROYAL BANK OF CANADA has improved earnings per share by 14.3% 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. During the past fiscal year, ROYAL BANK OF CANADA increased its bottom line by earning $6.01 versus $5.49 in the prior year.
- Net operating cash flow has increased to $5,063.00 million or 32.64% when compared to the same quarter last year. Despite an increase in cash flow of 32.64%, ROYAL BANK OF CANADA is still growing at a significantly lower rate than the industry average of 795.39%.
- 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 Commercial Banks industry and the overall market, ROYAL BANK OF CANADA's return on equity exceeds that of both the industry average and the S&P 500.
- RY has underperformed the S&P 500 Index, declining 19.41% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full Royal Bank Of Canada Ratings Report.
- Our dividend calendar.