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." Blueknight Energy Partners Dividend Yield: 13.80% Blueknight Energy Partners (NASDAQ: BKEP) shares currently have a dividend yield of 13.80%. Blueknight Energy Partners, L.P. provides integrated terminalling, storage, processing, gathering, and transportation services for companies engaged in the production, distribution, and marketing of crude oil and asphalt products in the United States. The company has a P/E ratio of 42.10. The average volume for Blueknight Energy Partners has been 89,300 shares per day over the past 30 days. Blueknight Energy Partners has a market cap of $139.0 million and is part of the energy industry. Shares are down 25.1% year-to-date as of the close of trading on Friday. 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 Blueknight Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 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'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 41.95%, 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. 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.
- The revenue growth greatly exceeded the industry average of 7.2%. Since the same quarter one year prior, revenues rose by 43.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ARES COMMERCIAL REAL ESTATE 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, ARES COMMERCIAL REAL ESTATE increased its bottom line by earning $0.85 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $0.85).
- ACRE'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 25.52%, 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.
- Net operating cash flow has significantly decreased to -$18.42 million or 163.01% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Ares Commercial Real Estate Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 2099.4% when compared to the same quarter one year prior, rising from $0.18 million to $3.96 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has remained constant at $14.64 million with no significant change when compared to the same quarter last year. Even though FIRST POTOMAC REALTY TRUST's cash flow growth was minimal, the firm managed to surpass its industry's average growth rate of -51.84%.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, FIRST POTOMAC REALTY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for FIRST POTOMAC REALTY TRUST is currently lower than what is desirable, coming in at 26.66%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.94% significantly trails the industry average.
- You can view the full First Potomac Realty Ratings Report.
- Our dividend calendar.