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." Spark Energy Dividend Yield: 7.60% Spark Energy (NASDAQ: SPKE) shares currently have a dividend yield of 7.60%. Spark Energy, Inc., through its subsidiaries, operates as an independent retail energy services company in the United States. It operates through two segments, Retail Natural Gas and Retail Electricity. The company has a P/E ratio of 18.07. The average volume for Spark Energy has been 82,500 shares per day over the past 30 days. Spark Energy has a market cap of $265.6 million and is part of the utilities industry. Shares are down 14% year-to-date as of the close of trading on Wednesday. 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 Spark Energy as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins. Highlights from the ratings report include:
- Compared to other companies in the Electric Utilities industry and the overall market, SPARK ENERGY INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The revenue growth came in higher than the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 14.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SPARK ENERGY INC 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SPARK ENERGY INC turned its bottom line around by earning $1.15 versus -$2.19 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $1.15).
- The gross profit margin for SPARK ENERGY INC is currently extremely low, coming in at 12.53%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.02% trails the industry average.
- The debt-to-equity ratio is very high at 4.30 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SPKE maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
- You can view the full Spark Energy Ratings Report.
- CRT 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 16.45, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for CROSS TIMBERS ROYALTY TRUST is currently very high, coming in at 100.00%. CRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, CRT's net profit margin of 92.92% significantly outperformed against the industry.
- CROSS TIMBERS 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, CROSS TIMBERS ROYALTY TRUST increased its bottom line by earning $2.67 versus $2.31 in the prior year.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, CROSS TIMBERS ROYALTY TRUST's return on equity significantly exceeds 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 26.88%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 61.84% 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.
- You can view the full Cross Timbers Royalty Ratings Report.
- The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 8.9%. 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.
- The gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 65.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 41.97% significantly outperformed against the industry average.
- The share price of HORIZON TECHNOLOGY FINANCE has not done very well: it is down 19.35% 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.
- Net operating cash flow has significantly decreased to -$4.94 million or 115.52% 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 Horizon Technology Finance Ratings Report.
- Our dividend calendar.