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: 6.00% Atwood Oceanics (NYSE: ATW) shares currently have a dividend yield of 6.00%. 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 2.78. The average volume for Atwood Oceanics has been 2,931,900 shares per day over the past 30 days. Atwood Oceanics has a market cap of $1.1 billion and is part of the energy industry. Shares are down 39% year-to-date as of the close of trading on Tuesday. 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 22.3%. 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 63.54%, 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.
- 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 13.4%. Since the same quarter one year prior, revenues rose by 30.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PATTERN ENERGY GROUP INC has improved earnings per share by 5.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PATTERN ENERGY GROUP INC reported poor results of -$0.55 versus -$0.24 in the prior year. This year, the market expects an improvement in earnings (-$0.06 versus -$0.55).
- The gross profit margin for PATTERN ENERGY GROUP INC is rather high; currently it is at 66.95%. Regardless of PEGI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PEGI's net profit margin of 16.90% compares favorably to the industry average.
- The debt-to-equity ratio is very high at 2.42 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.
- 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 Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, PATTERN ENERGY GROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Pattern Energy Group Ratings Report.
- The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues slightly increased by 3.5%. 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 slightly increased to $79.07 million or 7.57% when compared to the same quarter last year. Despite an increase in cash flow, MDU RESOURCES GROUP INC's cash flow growth rate is still lower than the industry average growth rate of 42.06%.
- 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 Multi-Utilities industry. The net income has significantly decreased by 524.4% when compared to the same quarter one year ago, falling from $54.11 million to -$229.60 million.
- The gross profit margin for MDU RESOURCES GROUP INC is currently extremely low, coming in at 10.09%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -23.28% is significantly below that of the industry average.
- You can view the full MDU Resources Group Ratings Report.
- Our dividend calendar.