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."Atlas Resource Partners Dividend Yield: 11.30% Atlas Resource Partners (NYSE: ARP) shares currently have a dividend yield of 11.30%. Atlas Resource Partners, L.P. operates as an independent developer and producer of natural gas, crude oil, and natural gas liquids in the United States. The company operates in three segments: Gas and Oil Production, Well Construction and Completion, and Other Partnership Management. The average volume for Atlas Resource Partners has been 894,400 shares per day over the past 30 days. Atlas Resource Partners has a market cap of $135.9 million and is part of the energy industry. Shares are down 4.8% year-to-date as of the close of trading on Tuesday. 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 Atlas Resource Partners as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- ARP'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 93.60%, 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.
- Despite the weak revenue results, ARP has outperformed against the industry average of 34.5%. Since the same quarter one year prior, revenues fell by 24.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- ATLAS RESOURCE PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ATLAS RESOURCE PARTNERS LP reported poor results of -$8.15 versus -$7.76 in the prior year. This year, the market expects an improvement in earnings (-$0.22 versus -$8.15).
- 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 50.3% when compared to the same quarter one year prior, rising from -$580.75 million to -$288.72 million.
- You can view the full Atlas Resource Partners Ratings Report.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 625.3% when compared to the same quarter one year ago, falling from $1.15 million to -$6.04 million.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, ZAIS FINANCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$3.95 million or 195.09% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The share price of ZAIS FINANCIAL CORP has not done very well: it is down 20.84% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- ZAIS FINANCIAL CORP 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 reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ZAIS FINANCIAL CORP increased its bottom line by earning $2.91 versus $0.81 in the prior year. For the next year, the market is expecting a contraction of 36.6% in earnings ($1.85 versus $2.91).
- You can view the full ZAIS Financial Ratings Report.
- The change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has significantly decreased by 28.0% when compared to the same quarter one year ago, falling from $0.38 million to $0.27 million.
- MDLY, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues fell by 23.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- MEDLEY MANAGEMENT INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($0.66 versus $0.24).
- Looking at the price performance of MDLY's shares over the past 12 months, there is not much good news to report: the stock is down 48.05%, 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 gross profit margin for MEDLEY MANAGEMENT INC is currently very high, coming in at 73.49%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MDLY's net profit margin of 1.72% significantly trails the industry average.
- You can view the full Medley Management Ratings Report.
- Our dividend calendar.