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."Delek Logistics Partners Dividend Yield: 9.30% Delek Logistics Partners (NYSE: DKL) shares currently have a dividend yield of 9.30%. Delek Logistics Partners, LP owns and operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. It operates in two segments, Pipelines and Transportation, and Wholesale Marketing and Terminalling. The company has a P/E ratio of 10.54. The average volume for Delek Logistics Partners has been 73,200 shares per day over the past 30 days. Delek Logistics Partners has a market cap of $639.7 million and is part of the energy industry. Shares are down 26.2% 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 Delek Logistics Partners as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 10.3% when compared to the same quarter one year prior, going from $14.00 million to $15.45 million.
- Net operating cash flow has significantly increased by 67.25% to $26.37 million when compared to the same quarter last year. In addition, DELEK LOGISTICS PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -49.64%.
- DKL, with its decline in revenue, slightly underperformed the industry average of 23.9%. Since the same quarter one year prior, revenues fell by 27.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Looking at the price performance of DKL's shares over the past 12 months, there is not much good news to report: the stock is down 45.73%, 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.
- DELEK LOGISTICS PARTNERS LP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, DELEK LOGISTICS PARTNERS LP reported lower earnings of $2.57 versus $2.87 in the prior year. For the next year, the market is expecting a contraction of 12.4% in earnings ($2.25 versus $2.57).
- You can view the full Delek Logistics Partners Ratings Report.
- Net operating cash flow has significantly increased by 201.75% to $75.81 million when compared to the same quarter last year. In addition, MEDLEY CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -146.35%.
- The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 66.33%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MCC's net profit margin of 1.45% significantly trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 24.3%. Since the same quarter one year prior, revenues fell by 16.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Capital Markets industry. The net income has significantly decreased by 96.2% when compared to the same quarter one year ago, falling from $11.78 million to $0.45 million.
- 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, MEDLEY CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Medley Capital Ratings Report.
- The revenue growth came in higher than the industry average of 11.5%. 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 5.34%.
- 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.
- The share price of SEASPAN CORP has not done very well: it is down 22.24% 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.
- 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.
- Our dividend calendar.