TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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." Natural Resources Partners Dividend Yield: 13.20% Natural Resources Partners (NYSE: NRP) shares currently have a dividend yield of 13.20%. Natural Resource Partners L.P., through its subsidiaries, owns, operates, manages, and leases mineral properties in the United States. The company operates through four segments: Coal, Hard Mineral Royalty and Other; Soda Ash; VantaCore; and Oil and Gas. The average volume for Natural Resources Partners has been 67,900 shares per day over the past 30 days. Natural Resources Partners has a market cap of $166.3 million and is part of the metals & mining industry. Shares are up 4% 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 Natural Resources 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, poor profit margins and weak operating cash flow. 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 352.0% when compared to the same quarter one year ago, falling from $8.65 million to -$21.79 million.
- The debt-to-equity ratio is very high at 18.14 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, NRP maintains a poor quick ratio of 0.80, which illustrates the inability to avoid short-term cash problems.
- 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, NATURAL RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for NATURAL RESOURCE PARTNERS LP is currently extremely low, coming in at 12.19%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -21.17% is significantly below that of the industry average.
- Net operating cash flow has decreased to $42.07 million or 21.59% when compared to the same quarter last year. Despite a decrease in cash flow NATURAL RESOURCE PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -39.87%.
- You can view the full Natural Resources Partners Ratings Report.