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 "Sell."Fly Leasing Dividend Yield: 7.30% Fly Leasing (NYSE: FLY) shares currently have a dividend yield of 7.30%. FLY Leasing Limited, together with its subsidiaries, engages in purchasing and leasing commercial aircraft under multi-year contracts to various airlines worldwide. The average volume for Fly Leasing has been 252,700 shares per day over the past 30 days. Fly Leasing has a market cap of $571.0 million and is part of the diversified services industry. Shares are unchanged year-to-date as of the close of trading on Friday. 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 Fly Leasing as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Trading Companies & Distributors industry. The net income has significantly decreased by 368.8% when compared to the same quarter one year ago, falling from $21.67 million to -$58.26 million.
- The debt-to-equity ratio is very high at 4.24 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Trading Companies & Distributors industry and the overall market, FLY LEASING LTD -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of FLY LEASING LTD -ADR has not done very well: it is down 8.90% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- FLY LEASING LTD -ADR 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FLY LEASING LTD -ADR reported lower earnings of $1.32 versus $1.67 in the prior year. This year, the market expects an improvement in earnings ($1.76 versus $1.32).
- You can view the full Fly Leasing Ratings Report.
- Currently the debt-to-equity ratio of 1.92 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, DLNG has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- DLNG'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 38.48%, 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 gross profit margin for DYNAGAS LNG PARTNERS LP is currently very high, coming in at 82.56%. Regardless of DLNG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DLNG's net profit margin of 41.76% significantly outperformed against the industry.
- Net operating cash flow has significantly increased by 81.60% to $26.39 million when compared to the same quarter last year. In addition, DYNAGAS LNG PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -20.54%.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, DYNAGAS LNG PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full Dynagas LNG Partners Ratings Report.
- The gross profit margin for SUNCOKE ENERGY PARTNERS LP is currently lower than what is desirable, coming in at 25.05%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.18% trails that of the industry average.
- SXCP'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 54.54%, 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.
- Despite the weak revenue results, SXCP has outperformed against the industry average of 18.9%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- SXCP's debt-to-equity ratio of 0.97 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that SXCP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.71 is high and demonstrates strong liquidity.
- 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. When compared to other companies in the Metals & Mining industry and the overall market, SUNCOKE ENERGY PARTNERS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full SunCoke Energy Partners Ratings Report.
- Our dividend calendar.