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."KNOT Offshore Partners Dividend Yield: 11.20% KNOT Offshore Partners (NYSE: KNOP) shares currently have a dividend yield of 11.20%. KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. As of March 18, 2016, it had a fleet of 10 shuttle tankers. The company has a P/E ratio of 12.35. The average volume for KNOT Offshore Partners has been 65,000 shares per day over the past 30 days. KNOT Offshore Partners has a market cap of $503.6 million and is part of the transportation industry. Shares are up 37.8% 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 KNOT Offshore Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 24.6%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- KNOT OFFSHORE PRTNRS LP has improved earnings per share by 21.9% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, KNOT OFFSHORE PRTNRS LP increased its bottom line by earning $1.57 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.57).
- 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, KNOT OFFSHORE PRTNRS 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.
- KNOP'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 25.74%, 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.
- The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- You can view the full KNOT Offshore Partners Ratings Report.
- Net operating cash flow has significantly increased by 209.09% to $18.52 million when compared to the same quarter last year. In addition, NEW YORK MORTGAGE TRUST INC has also vastly surpassed the industry average cash flow growth rate of 11.95%.
- NYMT, with its decline in revenue, underperformed when compared the industry average of 11.9%. Since the same quarter one year prior, revenues slightly dropped by 10.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has significantly decreased by 28.0% when compared to the same quarter one year ago, falling from $23.54 million to $16.95 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEW YORK MORTGAGE TRUST INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full New York Mortgage Ratings Report.
- The revenue growth greatly exceeded the industry average of 24.5%. Since the same quarter one year prior, revenues rose by 19.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for HERCULES CAPITAL INC is currently very high, coming in at 81.37%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 36.71% significantly outperformed against the industry average.
- After a year of stock price fluctuations, the net result is that HTGC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Capital Markets industry and the overall market, HERCULES CAPITAL INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Hercules Capital Ratings Report.
- Our dividend calendar.