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 16.75. The average volume for KNOT Offshore Partners has been 104,300 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $245.1 million and is part of the transportation industry. Shares are down 19.2% 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 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 has underperformed the S&P 500 Index, declining 17.69% 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 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.
- Net operating cash flow has significantly increased by 67.58% to $22.00 million when compared to the same quarter last year. In addition, KNOT OFFSHORE PRTNRS LP has also vastly surpassed the industry average cash flow growth rate of -19.60%.
- You can view the full KNOT Offshore Partners Ratings Report.
- NORDIC AMERICAN OFFSHORE 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. For the next year, the market is expecting a contraction of 196.8% in earnings (-$0.30 versus $0.31).
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 110.1% when compared to the same quarter one year ago, falling from $4.12 million to -$0.42 million.
- Net operating cash flow has decreased to $3.94 million or 23.40% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, NORDIC AMERICAN OFFSHORE has marginally lower results.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.26%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 111.11% compared to the year-earlier quarter. 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.
- 39.18% is the gross profit margin for NORDIC AMERICAN OFFSHORE which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NAO's net profit margin of -3.68% significantly underperformed when compared to the industry average.
- You can view the full Nordic American Offshore Ratings Report.
- THRX'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 47.92%, 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.
- THERAVANCE INC reported significant earnings per share improvement 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, THERAVANCE INC reported poor results of -$0.66 versus -$0.30 in the prior year. This year, the market expects an improvement in earnings (-$0.15 versus -$0.66).
- 48.19% is the gross profit margin for THERAVANCE INC which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -73.29% is in-line with the industry average.
- Net operating cash flow has significantly increased by 103.99% to $2.17 million when compared to the same quarter last year. In addition, THERAVANCE INC has also vastly surpassed the industry average cash flow growth rate of -41.41%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 87.7% when compared to the same quarter one year prior, rising from -$63.56 million to -$7.81 million.
- You can view the full Theravance Ratings Report.
- Our dividend calendar.