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 "Sell."USA Compression Partners Dividend Yield: 19.60% USA Compression Partners (NYSE: USAC) shares currently have a dividend yield of 19.60%. 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 average volume for USA Compression Partners has been 253,000 shares per day over the past 30 days. USA Compression Partners has a market cap of $562.9 million and is part of the energy industry. Shares are down 7.8% 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 sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 1978.0% when compared to the same quarter one year ago, falling from $8.50 million to -$159.63 million.
- The debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, USAC has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, USA COMPRESSION PRTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 47.08%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1777.77% compared to the year-earlier 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.
- USA COMPRESSION PRTNRS LP 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, USA COMPRESSION PRTNRS LP swung to a loss, reporting -$2.93 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$2.93).
- You can view the full USA Compression Partners Ratings Report.
- RAS'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 58.66%, 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.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, RAIT FINANCIAL TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- 38.94% is the gross profit margin for RAIT FINANCIAL TRUST which we consider to be strong. Regardless of RAS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAS's net profit margin of 10.16% is significantly lower than the industry average.
- RAIT FINANCIAL TRUST 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, RAIT FINANCIAL TRUST turned its bottom line around by earning $0.08 versus -$3.88 in the prior year. For the next year, the market is expecting a contraction of 312.5% in earnings (-$0.17 versus $0.08).
- 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 104.2% when compared to the same quarter one year prior, rising from -$246.64 million to $10.28 million.
- You can view the full Rait Financial Ratings Report.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Communications Equipment industry average. The net income has decreased by 24.3% when compared to the same quarter one year ago, dropping from $1.70 million to $1.28 million.
- 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 Communications Equipment industry and the overall market on the basis of return on equity, COMMUNICATIONS SYSTEMS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for COMMUNICATIONS SYSTEMS INC is currently lower than what is desirable, coming in at 34.86%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.98% significantly trails the industry average.
- Net operating cash flow has significantly decreased to $0.20 million or 94.35% 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 JCS's shares over the past 12 months, there is not much good news to report: the stock is down 38.51%, 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. 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.
- You can view the full Communications Systems Ratings Report.
- Our dividend calendar.