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." Sabine Royalty Dividend Yield: 12.70% Sabine Royalty (NYSE: SBR) shares currently have a dividend yield of 12.70%. Sabine Royalty Trust holds royalty and mineral interests in various oil and gas properties in the United States. The company has a P/E ratio of 6.27. The average volume for Sabine Royalty has been 41,400 shares per day over the past 30 days. Sabine Royalty has a market cap of $380.1 million and is part of the financial services industry. Shares are down 0.3% 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 Sabine Royalty as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- SBR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.85, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SABINE ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Despite the weak revenue results, SBR has outperformed against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 26.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- SABINE ROYALTY TRUST's earnings per share declined by 27.6% in the most recent quarter compared to the same quarter a year ago. Stable Earnings per share over the past year indicate the company has sound management over its earnings and share float. During the past fiscal year, SABINE ROYALTY TRUST's EPS of $4.03 remained unchanged from the prior years' EPS of $4.03.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.01%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 27.64% 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.
- You can view the full Sabine Royalty Ratings Report.
- The revenue growth greatly exceeded the industry average of 36.8%. Since the same quarter one year prior, revenues slightly increased by 2.4%. 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NUSTAR GP HOLDINGS LLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Looking at the price performance of NSH's shares over the past 12 months, there is not much good news to report: the stock is down 43.05%, 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.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 4.1% when compared to the same quarter one year ago, dropping from $17.64 million to $16.92 million.
- Net operating cash flow has decreased to $22.05 million or 12.40% when compared to the same quarter last year. Despite a decrease in cash flow NUSTAR GP HOLDINGS LLC is still fairing well by exceeding its industry average cash flow growth rate of -26.85%.
- You can view the full NuStar GP Holdings Ratings Report.
- The revenue growth came in higher than the industry average of 9.0%. Since the same quarter one year prior, revenues slightly increased by 6.3%. 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.
- Compared to other companies in the Gas Utilities industry and the overall market, FERRELLGAS PARTNERS -LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for FERRELLGAS PARTNERS -LP is currently extremely low, coming in at 13.81%. Regardless of FGP's low profit margin, it has managed to increase from the same period last year.
- The debt-to-equity ratio is very high at 21.19 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 0.44, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full Ferrellgas Partners Ratings Report.
- Our dividend calendar.