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: 12.10% Westmoreland Resource Partners (NYSE: WMLP) shares currently have a dividend yield of 12.10%. 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 1,800 shares per day over the past 30 days. Westmoreland Resource Partners has a market cap of $37.8 million and is part of the metals & mining industry. Shares are up 12700% year-to-date as of the close of trading on Monday. 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 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 230.0% when compared to the same quarter one year ago, falling from $9.79 million to -$12.72 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.25%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 157.69% compared to 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.
- WESTMORELAND RES PARTNERS LP 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. 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.
- The revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues rose by 25.8%. 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.
- You can view the full Westmoreland Resource Partners Ratings Report.
- The gross profit margin for JP ENERGY PARTNERS LP is currently extremely low, coming in at 6.07%. Regardless of JPEP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.44% trails the industry average.
- Despite the weak revenue results, JPEP has outperformed against the industry average of 37.0%. Since the same quarter one year prior, revenues fell by 23.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- JPEP's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, JP ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- JPEP'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 55.89%, 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.
- You can view the full JP Energy Partners Ratings Report.
- 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 Metals & Mining industry. The net income has significantly decreased by 552.8% when compared to the same quarter one year ago, falling from -$3.60 million to -$23.50 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, SUNCOKE ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SUNCOKE ENERGY INC is rather low; currently it is at 20.96%. It has decreased from the same quarter the previous year.
- Net operating cash flow has significantly decreased to $6.40 million or 80.66% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The debt-to-equity ratio is very high at 3.56 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SXC's quick ratio is somewhat strong at 1.14, demonstrating the ability to handle short-term liquidity needs.
- You can view the full SunCoke Energy Ratings Report.
- Our dividend calendar.