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." Arc Logistics Partners Dividend Yield: 14.70% Arc Logistics Partners (NYSE: ARCX) shares currently have a dividend yield of 14.70%. Arc Logistics Partners LP engages in the terminalling, storage, throughput, and transloading of crude oil and petroleum products. The company has a P/E ratio of 22.58. The average volume for Arc Logistics Partners has been 29,300 shares per day over the past 30 days. Arc Logistics Partners has a market cap of $230.6 million and is part of the energy industry. Shares are down 11.8% 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 Arc Logistics 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:
- ARCX'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 35.49%, 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. 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.
- ARCX's debt-to-equity ratio of 0.63 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.13 is sturdy.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARC LOGISTICS 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.
- The gross profit margin for ARC LOGISTICS PARTNERS LP is rather high; currently it is at 66.67%. It has increased significantly from the same period last year. Along with this, the net profit margin of 11.95% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 131.72% to $12.52 million when compared to the same quarter last year. In addition, ARC LOGISTICS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -49.05%.
- You can view the full Arc Logistics Partners Ratings Report.