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."Huaneng Power International Dividend Yield: 12.30% Huaneng Power International (NYSE: HNP) shares currently have a dividend yield of 12.30%. Huaneng Power International, Inc., an independent power producer, generates and sells electricity and heat to the regional or provincial grid companies in the People's Republic of China and Singapore. The company has a P/E ratio of 58.20. The average volume for Huaneng Power International has been 100,000 shares per day over the past 30 days. Huaneng Power International has a market cap of $8.8 billion and is part of the utilities industry. Shares are down 30.7% year-to-date as of the close of trading on Monday. 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 Huaneng Power International as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and notable return on equity. 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 feeble growth in the company's earnings per share. Highlights from the ratings report include:
- HNP, with its decline in revenue, slightly underperformed the industry average of 13.9%. Since the same quarter one year prior, revenues fell by 19.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Looking at the price performance of HNP's shares over the past 12 months, there is not much good news to report: the stock is down 49.94%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- Despite the current debt-to-equity ratio of 1.75, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.22 is very low and demonstrates very weak liquidity.
- You can view the full Huaneng Power International Ratings Report.
- The revenue growth came in higher than the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 14.3%. 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.
- Net operating cash flow has increased to $77.90 million or 21.02% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 4.35%.
- The gross profit margin for SEASPAN CORP is rather high; currently it is at 68.96%. Regardless of SSW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.30% trails the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.38%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 175.00% 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.
- 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 Marine industry. The net income has significantly decreased by 66.6% when compared to the same quarter one year ago, falling from $21.33 million to $7.13 million.
- You can view the full Seaspan Ratings Report.
- The revenue growth greatly exceeded the industry average of 24.0%. Since the same quarter one year prior, revenues rose by 44.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NAVIOS MARITIME MIDSTR PN LP has improved earnings per share by 9.1% 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, NAVIOS MARITIME MIDSTR PN LP increased its bottom line by earning $1.35 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($1.39 versus $1.35).
- The gross profit margin for NAVIOS MARITIME MIDSTR PN LP is currently very high, coming in at 95.66%. Regardless of NAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NAP's net profit margin of 31.03% significantly outperformed against the industry.
- NAP's debt-to-equity ratio of 0.71 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 8.76 is very high and demonstrates very strong liquidity.
- NAP has underperformed the S&P 500 Index, declining 24.77% 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.
- You can view the full Navios Maritime Midstream Partners Ratings Report.
- Our dividend calendar.