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."American Midstream Partners Dividend Yield: 18.80% American Midstream Partners (NYSE: AMID) shares currently have a dividend yield of 18.80%. American Midstream Partners, LP engages in gathering, treating, processing, and transporting natural gas, fractionating natural gas liquids (NGLs), and storing specialty chemical products in the Gulf Coast and Southeast regions of the United States. The average volume for American Midstream Partners has been 290,700 shares per day over the past 30 days. American Midstream Partners has a market cap of $305.2 million and is part of the energy industry. Shares are down 48.2% 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 American Midstream Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and deteriorating net income. Highlights from the ratings report include:
- The debt-to-equity ratio of 1.21 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.17, which clearly demonstrates the inability to cover short-term cash needs.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, AMERICAN MIDSTREAM PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $2.01 million or 65.50% 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.
- AMID'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 62.58%, 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 change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 89.8% when compared to the same quarter one year ago, falling from -$2.46 million to -$4.66 million.
- You can view the full American Midstream Partners Ratings Report.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GOOD has underperformed the S&P 500 Index, declining 17.03% from its price level of one year ago. 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 141.1% when compared to the same quarter one year ago, falling from $0.23 million to -$0.10 million.
- GLADSTONE COMMERCIAL CORP's earnings per share declined by 20.0% in the most recent quarter compared to 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 (-$0.16 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.
- 40.43% 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 -0.44% significantly underperformed when compared to the industry average.
- You can view the full Gladstone Commercial Ratings Report.
- NEW SENIOR INVESTMENT GROUP's earnings per share declined by 23.5% in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 181.1% in earnings (-$1.04 versus -$0.37).
- 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 61.0% when compared to the same quarter one year ago, falling from -$11.15 million to -$17.96 million.
- The gross profit margin for NEW SENIOR INVESTMENT GROUP is currently lower than what is desirable, coming in at 27.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -17.10% is significantly below that of the industry average.
- Looking at the price performance of SNR's shares over the past 12 months, there is not much good news to report: the stock is down 47.20%, 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.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEW SENIOR INVESTMENT GROUP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full New Senior Investment Group Ratings Report.
- Our dividend calendar.