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." CrossAmerica Partners Dividend Yield: 10.30% CrossAmerica Partners (NYSE: CAPL) shares currently have a dividend yield of 10.30%. CrossAmerica Partners LP engages in the wholesale distribution of motor fuels, and ownership and leasing of real estate used in the retail distribution of motor fuels in the United States. It distributes gasoline and diesel fuel to approximately 1,100 sites located in 25 states. The company has a P/E ratio of 45.35. The average volume for CrossAmerica Partners has been 102,900 shares per day over the past 30 days. CrossAmerica Partners has a market cap of $768.8 million and is part of the energy industry. Shares are down 10.8% year-to-date as of the close of trading on Friday. 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 CrossAmerica Partners as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and poor profit margins. Highlights from the ratings report include:
- CROSSAMERICA PARTNERS 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CROSSAMERICA PARTNERS LP turned its bottom line around by earning $0.26 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus $0.26).
- 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 159.6% when compared to the same quarter one year prior, rising from -$2.97 million to $1.77 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CROSSAMERICA PARTNERS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- CAPL'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 30.49%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- The debt-to-equity ratio is very high at 2.02 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 0.48, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full CrossAmerica Partners Ratings Report.
- 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 375.4% when compared to the same quarter one year prior, rising from $8.37 million to $39.80 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.9%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- 35.52% is the gross profit margin for INVESTORS REAL ESTATE TRUST which we consider to be strong. Regardless of IRET's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IRET's net profit margin of 70.63% significantly outperformed against the industry.
- IRET has underperformed the S&P 500 Index, declining 14.94% 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.
- Net operating cash flow has significantly decreased to $12.62 million or 55.79% 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 Investors Real Estate Ratings Report.
- The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 65.78%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.36% trails the industry average.
- Despite the weak revenue results, FSC has outperformed against the industry average of 24.5%. Since the same quarter one year prior, revenues fell by 10.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FIFTH STREET FINANCE CORP 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIFTH STREET FINANCE CORP reported lower earnings of $0.11 versus $0.79 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus $0.11).
- 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 Capital Markets industry. The net income has significantly decreased by 80.7% when compared to the same quarter one year ago, falling from $25.74 million to $4.98 million.
- 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 Capital Markets industry and the overall market, FIFTH STREET FINANCE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Fifth Street Finance Ratings Report.
- Our dividend calendar.