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."Suburban Propane Partners Dividend Yield: 14.60% Suburban Propane Partners (NYSE: SPH) shares currently have a dividend yield of 14.60%. Suburban Propane Partners, L.P., through its subsidiaries, engages in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has a P/E ratio of 17.62. The average volume for Suburban Propane Partners has been 293,000 shares per day over the past 30 days. Suburban Propane Partners has a market cap of $1.5 billion and is part of the utilities industry. Shares are down 46% year-to-date as of the close of trading on Thursday. 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 Suburban Propane Partners as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and generally higher debt management risk. Highlights from the ratings report include:
- 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 Gas Utilities industry and the overall market on the basis of return on equity, SUBURBAN PROPANE PRTNRS -LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- SPH, with its decline in revenue, underperformed when compared the industry average of 8.9%. Since the same quarter one year prior, revenues fell by 27.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has decreased to $65.07 million or 19.25% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Looking at the price performance of SPH's shares over the past 12 months, there is not much good news to report: the stock is down 41.67%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SPH is still more expensive than most of the other companies in its industry.
- You can view the full Suburban Propane Partners Ratings Report.
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 24.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 302.8% when compared to the same quarter one year prior, rising from -$8.81 million to $17.87 million.
- Net operating cash flow has increased to -$78.57 million or 31.69% when compared to the same quarter last year. Despite an increase in cash flow of 31.69%, TRIANGLE CAPITAL CORP is still growing at a significantly lower rate than the industry average of 273.88%.
- After a year of stock price fluctuations, the net result is that TCAP's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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 company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Capital Markets industry and the overall market, TRIANGLE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Triangle Capital Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 23.9% when compared to the same quarter one year prior, going from $11.27 million to $13.97 million.
- 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, BLUEKNIGHT ENERGY PRTNRS LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- BKEP has underperformed the S&P 500 Index, declining 13.63% from its price level of one year ago. 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.
- The debt-to-equity ratio is very high at 2.03 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 0.50, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Blueknight Energy Partners Ratings Report.
- Our dividend calendar.