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." NuStar GP Holdings Dividend Yield: 8.70% NuStar GP Holdings (NYSE: NSH) shares currently have a dividend yield of 8.70%. NuStar GP Holdings, LLC, through its ownership interests in NuStar Energy L.P., engages in the transportation of petroleum products and anhydrous ammonia. The company is also involved in the terminalling, storage, and marketing of petroleum products. The company has a P/E ratio of 17.21. The average volume for NuStar GP Holdings has been 122,700 shares per day over the past 30 days. NuStar GP Holdings has a market cap of $1.1 billion and is part of the energy industry. Shares are up 13.2% 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 NuStar GP Holdings as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures 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, weak operating cash flow and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The gross profit margin for NUSTAR GP HOLDINGS LLC is currently very high, coming in at 100.00%. NSH has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NSH's net profit margin of 98.00% significantly outperformed against the industry.
- NSH's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.13 is very weak and demonstrates a lack of ability to pay short-term obligations.
- NSH, with its decline in revenue, underperformed when compared the industry average of 24.0%. Since the same quarter one year prior, revenues fell by 38.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 33.19%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 37.09% 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.
- Net operating cash flow has decreased to $14.38 million or 35.77% when compared to the same quarter last year. Despite a decrease in cash flow NUSTAR GP HOLDINGS LLC is still fairing well by exceeding its industry average cash flow growth rate of -49.80%.
- You can view the full NuStar GP Holdings Ratings Report.
- WSR's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 20.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- 46.97% is the gross profit margin for WHITESTONE REIT which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WSR's net profit margin of 19.57% significantly trails the industry average.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, WHITESTONE REIT's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $5.68 million or 24.43% 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.
- You can view the full Whitestone REIT Ratings Report.
- The gross profit margin for AMERICAN CAPITAL SR FLTG LTD is currently very high, coming in at 82.14%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 49.89% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 162.40% to $14.44 million when compared to the same quarter last year. In addition, AMERICAN CAPITAL SR FLTG LTD has also vastly surpassed the industry average cash flow growth rate of -199.57%.
- Despite the weak revenue results, ACSF has outperformed against the industry average of 23.7%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of AMERICAN CAPITAL SR FLTG LTD has not done very well: it is down 21.66% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when 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.
- 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 Capital Markets industry and the overall market, AMERICAN CAPITAL SR FLTG LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full American Capital Senior Floating Ratings Report.
- Our dividend calendar.