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."USA Compression Partners Dividend Yield: 19.50% USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 19.50%. USA Compression Partners, LP provides natural gas compression services under term contracts with customers in the oil and gas industry in the United States. It engineers, designs, operates, services, and repairs its compression units and maintains related support inventory and equipment. The company has a P/E ratio of 34.71. The average volume for USA Compression Partners has been 201,300 shares per day over the past 30 days. USA Compression Partners has a market cap of $404.5 million and is part of the energy industry. Shares are down 12.8% 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 USA Compression Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 32.7%. Since the same quarter one year prior, revenues rose by 23.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- USA COMPRESSION PRTNRS LP 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, USA COMPRESSION PRTNRS LP increased its bottom line by earning $0.58 versus $0.32 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.58).
- 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. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, USA COMPRESSION PRTNRS LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- USAC'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 52.36%, 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. 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, USAC is still more expensive than most of the other companies in its industry.
- You can view the full USA Compression Partners Ratings Report.
- The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 19.9%. 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 gross profit margin for ELLINGTON FINANCIAL LLC is currently very high, coming in at 76.27%. It has increased significantly from the same period last year. Along with this, the net profit margin of 14.42% is above that of the industry average.
- 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 Capital Markets industry. The net income has significantly decreased by 69.9% when compared to the same quarter one year ago, falling from $12.95 million to $3.90 million.
- 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, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ellington Financial Ratings Report.
- The revenue growth greatly exceeded the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 40.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CSPI 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. To add to this, CSPI has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.
- CSP INC reported significant earnings per share improvement in the most recent quarter compared to 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, CSP INC swung to a loss, reporting -$0.05 versus $0.38 in the prior year.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the IT Services industry and the overall market, CSP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CSP INC is rather low; currently it is at 21.97%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.35% significantly trails the industry average.
- You can view the full CSP Ratings Report.
- Our dividend calendar.