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."Mesa Royalty Dividend Yield: 7.60% Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 7.60%. Mesa Royalty Trust holds net overriding royalty interests in various oil and gas properties in the United States. It has interests in properties located in the Hugoton field of Kansas; the San Juan Basin field of New Mexico and Colorado; and the Yellow Creek field of Wyoming. The company has a P/E ratio of 2.07. The average volume for Mesa Royalty has been 15,100 shares per day over the past 30 days. Mesa Royalty has a market cap of $13.5 million and is part of the financial services industry. Shares are down 3.1% 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 Mesa 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, expanding profit margins 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 and deteriorating net income. Highlights from the ratings report include:
- MTR 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 11.92, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for MESA ROYALTY TRUST is currently very high, coming in at 100.00%. MTR has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MTR's net profit margin of 102.74% significantly outperformed against the industry.
- MESA ROYALTY TRUST has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, MESA ROYALTY TRUST increased its bottom line by earning $3.50 versus $1.85 in the prior year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 71.94%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 76.84% 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.
- 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 76.8% when compared to the same quarter one year ago, falling from $1.77 million to $0.41 million.
- You can view the full Mesa Royalty Ratings Report.
- HEES's revenue growth has slightly outpaced the industry average of 4.1%. Since the same quarter one year prior, revenues slightly increased by 0.7%. 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.
- 48.33% is the gross profit margin for H&E EQUIPMENT SERVICES INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.33% trails the industry average.
- Net operating cash flow has declined marginally to $65.46 million or 4.81% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, H&E EQUIPMENT SERVICES INC has marginally lower results.
- The debt-to-equity ratio is very high at 6.73 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full H&E Equipment Services Ratings Report.
- The revenue growth came in higher than the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 11.2%. 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.
- TNH 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 3.03, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for TERRA NITROGEN CO -LP is rather high; currently it is at 56.06%. Regardless of TNH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TNH's net profit margin of 46.20% significantly outperformed against the industry.
- TERRA NITROGEN CO -LP's earnings per share declined by 14.2% 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 two years. During the past fiscal year, TERRA NITROGEN CO -LP reported lower earnings of $12.07 versus $15.77 in the prior year.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Chemicals industry average, but is greater than that of the S&P 500. The net income has decreased by 3.6% when compared to the same quarter one year ago, dropping from $72.00 million to $69.40 million.
- You can view the full Terra Nitrogen Ratings Report.
- Our dividend calendar.