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: 19.70% Atlas Resource Partners (NYSE: ARP) shares currently have a dividend yield of 19.70%. 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. It operates through three segments: Gas and Oil Production, Well Construction and Completion, and Other Partnership Management. The average volume for Atlas Resource Partners has been 777,000 shares per day over the past 30 days. Atlas Resource Partners has a market cap of $77.8 million and is part of the energy industry. Shares are down 26.2% year-to-date as of the close of trading on Thursday. 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 90.93%, 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 34.7%. 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 (-$0.60 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 debt-to-equity ratio is very high at 4.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
- SRLP has underperformed the S&P 500 Index, declining 21.57% from its price level of one year ago. 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.
- The gross profit margin for SPRAGUE RESOURCES LP is currently extremely low, coming in at 7.46%. Regardless of SRLP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SRLP's net profit margin of 1.53% compares favorably to the industry average.
- SRLP, with its decline in revenue, slightly underperformed the industry average of 34.7%. Since the same quarter one year prior, revenues fell by 37.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- SPRAGUE RESOURCES LP 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, SPRAGUE RESOURCES LP turned its bottom line around by earning $6.07 versus -$1.25 in the prior year. For the next year, the market is expecting a contraction of 55.4% in earnings ($2.71 versus $6.07).
- You can view the full Sprague Resources Ratings Report.
- ANH has underperformed the S&P 500 Index, declining 6.72% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $13.62 million or 46.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- ANH, with its decline in revenue, underperformed when compared the industry average of 7.9%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- ANWORTH MTG ASSET CORP 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, ANWORTH MTG ASSET CORP reported lower earnings of $0.07 versus $0.18 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.07).
- You can view the full Anworth Mortgage Asset Ratings Report.
- Our dividend calendar.