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."Ardmore Shipping Dividend Yield: 7.20% Ardmore Shipping (NYSE: ASC) shares currently have a dividend yield of 7.20%. Ardmore Shipping Corporation engages in the seaborne transportation of petroleum products and chemicals through product and chemical tankers worldwide. As of December 31, 2015, the company operated 24 vessels. The company has a P/E ratio of 7.92. The average volume for Ardmore Shipping has been 273,200 shares per day over the past 30 days. Ardmore Shipping has a market cap of $229.9 million and is part of the transportation industry. Shares are down 31.6% 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 Ardmore Shipping as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, ASC maintains a poor quick ratio of 0.94, which illustrates the inability to avoid short-term cash problems.
- ASC has underperformed the S&P 500 Index, declining 23.08% from its price level of one year ago. 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.
- ARDMORE SHIPPING CORP has improved earnings per share by 30.0% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ARDMORE SHIPPING CORP increased its bottom line by earning $1.23 versus $0.05 in the prior year. For the next year, the market is expecting a contraction of 6.5% in earnings ($1.15 versus $1.23).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARDMORE SHIPPING CORP'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.
- You can view the full Ardmore Shipping 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 Industrial Conglomerates industry. The net income has significantly decreased by 619.9% when compared to the same quarter one year ago, falling from $161.00 million to -$837.00 million.
- The debt-to-equity ratio is very high at 5.40 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- 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 Industrial Conglomerates industry and the overall market, ICAHN ENTERPRISES LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 35.88%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 588.97% 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.
- ICAHN ENTERPRISES 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. 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, ICAHN ENTERPRISES LP reported poor results of -$9.01 versus -$2.92 in the prior year. This year, the market expects an improvement in earnings (-$2.85 versus -$9.01).
- You can view the full Icahn Ratings Report.
- The debt-to-equity ratio is very high at 14.11 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, NRP has a quick ratio of 0.53, 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, NATURAL RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $19.43 million or 64.97% 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.
- NRP'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 64.53%, 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.
- NRP, with its decline in revenue, slightly underperformed the industry average of 24.5%. Since the same quarter one year prior, revenues fell by 25.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Natural Resources Partners Ratings Report.
- Our dividend calendar.