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."Delek Logistics Partners Dividend Yield: 8.40% Delek Logistics Partners (NYSE: DKL) shares currently have a dividend yield of 8.40%. Delek Logistics Partners, LP owns and operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. It operates through two segments, Pipelines and Transportation, and Wholesale Marketing and Terminalling. The company has a P/E ratio of 11.11. The average volume for Delek Logistics Partners has been 68,600 shares per day over the past 30 days. Delek Logistics Partners has a market cap of $679.8 million and is part of the energy industry. Shares are down 23.7% 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 Delek Logistics Partners as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- DKL, with its decline in revenue, slightly underperformed the industry average of 34.5%. Since the same quarter one year prior, revenues fell by 37.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for DELEK LOGISTICS PARTNERS LP is rather low; currently it is at 24.09%. Regardless of DKL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DKL's net profit margin of 14.04% significantly outperformed against the industry.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 24.2% when compared to the same quarter one year ago, dropping from $20.18 million to $15.30 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 32.09% 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.
- Net operating cash flow has significantly decreased to $1.26 million or 93.98% 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 Delek Logistics Partners Ratings Report.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.11 is very weak and demonstrates a lack of ability to pay short-term obligations.
- SSI, with its decline in revenue, underperformed when compared the industry average of 9.3%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- STAGE STORES INC's earnings per share declined by 47.8% 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, STAGE STORES INC reported lower earnings of $0.17 versus $1.17 in the prior year. This year, the market expects an improvement in earnings ($0.69 versus $0.17).
- The gross profit margin for STAGE STORES INC is currently lower than what is desirable, coming in at 31.88%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.17% trails that of the industry average.
- Net operating cash flow has decreased to $71.13 million or 33.26% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Stage Stores Ratings Report.
- The gross profit margin for THL CREDIT INC is rather high; currently it is at 65.45%. 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 11.22% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- THL CREDIT INC 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, THL CREDIT INC reported lower earnings of $1.07 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $1.07).
- 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 78.0% when compared to the same quarter one year ago, falling from $11.81 million to $2.59 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, THL CREDIT INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full THL Credit Ratings Report.
- Our dividend calendar.