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."Blueknight Energy Partners Dividend Yield: 10.90% Blueknight Energy Partners (NASDAQ: BKEP) shares currently have a dividend yield of 10.90%. Blueknight Energy Partners, L.P. provides integrated terminalling, storage, processing, gathering, and transportation services for companies engaged in the production, distribution, and marketing of crude oil and asphalt products in the United States. The average volume for Blueknight Energy Partners has been 46,700 shares per day over the past 30 days. Blueknight Energy Partners has a market cap of $176.3 million and is part of the energy industry. Shares are down 7.5% 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 Blueknight Energy 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, weak operating cash flow and generally disappointing historical performance in the stock itself. 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 291.9% when compared to the same quarter one year ago, falling from $8.79 million to -$16.86 million.
- The debt-to-equity ratio is very high at 2.81 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, BKEP has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 on the basis of return on equity, BLUEKNIGHT ENERGY PRTNRS LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has declined marginally to $17.34 million or 8.36% when compared to the same quarter last year. Despite a decrease in cash flow BLUEKNIGHT ENERGY PRTNRS LP is still fairing well by exceeding its industry average cash flow growth rate of -49.17%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.08%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 750.00% 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 Blueknight Energy Partners Ratings Report.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ELLINGTON RESIDENTIAL MTG's return on equity significantly trails that of both the industry average and the S&P 500.
- The revenue fell significantly faster than the industry average of 11.9%. Since the same quarter one year prior, revenues fell by 21.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Compared to where it was trading one year ago, EARN is down 21.16% to its most recent closing price of 12.71. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
- ELLINGTON RESIDENTIAL MTG 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, ELLINGTON RESIDENTIAL MTG reported lower earnings of $0.00 versus $1.77 in the prior year. This year, the market expects an increase in earnings to $2.10 from $0.00.
- The gross profit margin for ELLINGTON RESIDENTIAL MTG is currently very high, coming in at 87.22%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EARN's net profit margin of 10.50% significantly trails the industry average.
- You can view the full Ellington Residential Mortgage REIT Ratings Report.
- FULL'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 25.93%, 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, FULL CIRCLE CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for FULL CIRCLE CAPITAL CORP is currently very high, coming in at 253.89%. It has increased significantly from the same period last year. Along with this, the net profit margin of 355.64% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 91.70% to $15.93 million when compared to the same quarter last year. In addition, FULL CIRCLE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -183.28%.
- FULL CIRCLE CAPITAL CORP 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, FULL CIRCLE CAPITAL CORP continued to lose money by earning -$0.41 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus -$0.41).
- You can view the full Full Circle Capital Ratings Report.
- Our dividend calendar.