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."Westmoreland Resource Partners Dividend Yield: 11.10% Westmoreland Resource Partners (NYSE: WMLP) shares currently have a dividend yield of 11.10%. Westmoreland Resource Partners, LP produces and markets thermal coal in the United States. It also produces surface mined coal in Ohio. As of December 31, 2014, the company managed 13 active surface mines and managed these mines as 6 mining complexes located in eastern Ohio. The average volume for Westmoreland Resource Partners has been 1,600 shares per day over the past 30 days. Westmoreland Resource Partners has a market cap of $41.2 million and is part of the metals & mining industry. Shares are up 12681.8% 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 Westmoreland Resource Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, poor profit margins and generally disappointing historical performance in the stock itself. 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 120.6% when compared to the same quarter one year ago, falling from -$2.90 million to -$6.39 million.
- The debt-to-equity ratio is very high at 3.18 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, WMLP maintains a poor quick ratio of 0.77, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for WESTMORELAND RES PARTNERS LP is rather low; currently it is at 22.25%. Regardless of WMLP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, WMLP's net profit margin of -10.74% significantly underperformed when compared to the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, WMLP has underperformed the S&P 500 Index, declining 20.84% 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.
- WESTMORELAND RES PARTNERS LP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, WESTMORELAND RES PARTNERS LP continued to lose money by earning -$4.61 versus -$10.27 in the prior year.
- You can view the full Westmoreland Resource Partners Ratings Report.
- The gross profit margin for FULL CIRCLE CAPITAL CORP is currently lower than what is desirable, coming in at 33.67%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -34.61% is significantly below that of the industry average.
- FULL'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 46.49%, 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.
- 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 Capital Markets industry and the overall market, FULL CIRCLE CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 71.08% to -$6.95 million when compared to the same quarter last year. In addition, FULL CIRCLE CAPITAL CORP has also modestly surpassed the industry average cash flow growth rate of 65.52%.
- FULL CIRCLE CAPITAL CORP 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, FULL CIRCLE CAPITAL CORP continued to lose money by earning -$0.41 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus -$0.41).
- You can view the full Full Circle Capital Ratings Report.
- In its most recent trading session, GOOD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 64.6% when compared to the same quarter one year ago, falling from $1.22 million to $0.43 million.
- GLADSTONE COMMERCIAL CORP 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GLADSTONE COMMERCIAL CORP reported poor results of -$0.61 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings (-$0.05 versus -$0.61).
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- 44.73% is the gross profit margin for GLADSTONE COMMERCIAL CORP which we consider to be strong. Regardless of GOOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOOD's net profit margin of 2.08% is significantly lower than the industry average.
- You can view the full Gladstone Commercial Ratings Report.
- Our dividend calendar.