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."Global Partners Dividend Yield: 14.60% Global Partners (NYSE: GLP) shares currently have a dividend yield of 14.60%. Global Partners LP, a midstream logistics and marketing company, distributes gasoline, distillates, residual oil, and renewable fuels to wholesalers, retailers, and commercial customers in the New England states and New York. The company has a P/E ratio of 11.44. The average volume for Global Partners has been 227,300 shares per day over the past 30 days. Global Partners has a market cap of $431.7 million and is part of the wholesale industry. Shares are down 27.7% 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 Global Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- GLOBAL PARTNERS LP 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, GLOBAL PARTNERS LP reported lower earnings of $1.16 versus $3.96 in the prior year. For the next year, the market is expecting a contraction of 132.3% in earnings (-$0.38 versus $1.16).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 108.2% when compared to the same quarter one year ago, falling from $27.91 million to -$2.28 million.
- Currently the debt-to-equity ratio of 1.95 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, GLP has a quick ratio of 0.58, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly decreased to $67.90 million or 55.00% 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.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 107.52% 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 Global 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 Energy Equipment & Services industry. The net income has significantly decreased by 828.9% when compared to the same quarter one year ago, falling from $18.93 million to -$137.94 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 Energy Equipment & Services industry and the overall market, ARCHROCK PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 2.61 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.88, which shows the ability to cover short-term cash needs.
- Net operating cash flow has decreased to $42.88 million or 11.75% when compared to the same quarter last year. Despite a decrease in cash flow ARCHROCK PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -35.26%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 49.80%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 966.66% compared to the year-earlier quarter. 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.
- You can view the full Archrock Partners Ratings Report.
- The gross profit margin for INDEPENDENCE REALTY TRUST is rather low; currently it is at 21.53%. Regardless of IRT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IRT's net profit margin of -0.19% significantly underperformed when compared to the industry average.
- IRT has underperformed the S&P 500 Index, declining 13.42% from its price level of one year ago. 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.
- INDEPENDENCE REALTY TRUST 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, INDEPENDENCE REALTY TRUST increased its bottom line by earning $0.80 versus $0.19 in the prior year. For the next year, the market is expecting a contraction of 56.9% in earnings ($0.35 versus $0.80).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 67.8% when compared to the same quarter one year prior, rising from -$0.23 million to -$0.08 million.
- IRT's very impressive revenue growth greatly exceeded the industry average of 11.1%. Since the same quarter one year prior, revenues leaped by 78.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- You can view the full Independence Realty Ratings Report.
- Our dividend calendar.