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."KNOT Offshore Partners Dividend Yield: 11.70% KNOT Offshore Partners (NYSE: KNOP) shares currently have a dividend yield of 11.70%. KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. The company has a P/E ratio of 16.51. The average volume for KNOT Offshore Partners has been 114,000 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $241.6 million and is part of the transportation industry. Shares are down 23.2% 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 KNOT Offshore Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- KNOP'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 40.22%, 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 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, KNOT OFFSHORE PRTNRS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for KNOT OFFSHORE PRTNRS LP is currently very high, coming in at 80.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.62% significantly outperformed against the industry average.
- KNOT OFFSHORE PRTNRS LP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, KNOT OFFSHORE PRTNRS LP increased its bottom line by earning $1.34 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.64 versus $1.34).
- You can view the full KNOT Offshore Partners Ratings Report.
- Net operating cash flow has significantly decreased to -$0.31 million or 447.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- DSWL has underperformed the S&P 500 Index, declining 21.18% 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.
- The gross profit margin for DESWELL INDUSTRIES INC is currently lower than what is desirable, coming in at 29.46%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.16% trails the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- DESWELL INDUSTRIES INC 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 year. During the past fiscal year, DESWELL INDUSTRIES INC continued to lose money by earning -$0.14 versus -$0.47 in the prior year.
- You can view the full Deswell Industries Ratings Report.
- 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 greatly underperformed compared to the Computers & Peripherals industry average. The net income has significantly decreased by 27.5% when compared to the same quarter one year ago, falling from $1.08 million to $0.78 million.
- Looking at the price performance of CCUR's shares over the past 12 months, there is not much good news to report: the stock is down 28.52%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- CONCURRENT COMPUTER CP's earnings per share declined by 25.0% in the most recent quarter compared to 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, CONCURRENT COMPUTER CP increased its bottom line by earning $2.04 versus $0.49 in the prior year.
- The revenue fell significantly faster than the industry average of 36.8%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for CONCURRENT COMPUTER CP is rather high; currently it is at 61.62%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CCUR's net profit margin of 4.58% significantly trails the industry average.
- You can view the full Concurrent Computer Ratings Report.
- Our dividend calendar.