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."USD Partners Dividend Yield: 12.30% USD Partners (NYSE: USDP) shares currently have a dividend yield of 12.30%. USD Partners LP acquires, develops, and operates energy-related rail terminals and other midstream infrastructure assets and businesses in the United States and Canada. The company operates through two segments, Terminalling Services and Fleet Services. The company has a P/E ratio of 12.10. The average volume for USD Partners has been 48,300 shares per day over the past 30 days. USD Partners has a market cap of $227.8 million and is part of the transportation industry. Shares are up 42.5% 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 USD Partners 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 is very high at 5.15 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, USDP has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, USDP has underperformed the S&P 500 Index, declining 15.85% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- USD PARTNERS LP's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, USD PARTNERS LP turned its bottom line around by earning $0.83 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus $0.83).
- 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 5.3% when compared to the same quarter one year prior, going from $2.04 million to $2.15 million.
- The gross profit margin for USD PARTNERS LP is rather high; currently it is at 67.09%. It has increased significantly from the same period last year. Along with this, the net profit margin of 8.15% is above that of the industry average.
- You can view the full USD Partners Ratings Report.
- BP PRUDHOE BAY ROYALTY TRUST 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. During the past fiscal year, BP PRUDHOE BAY ROYALTY TRUST reported lower earnings of $5.86 versus $10.60 in the prior year.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 77.6% when compared to the same quarter one year ago, falling from $57.53 million to $12.88 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 71.11%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 77.69% 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.
- 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, BP PRUDHOE BAY ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- BPT, with its very weak revenue results, has greatly underperformed against the industry average of 23.9%. Since the same quarter one year prior, revenues plummeted by 77.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full BP Prudhoe Bay Royalty Ratings Report.
- 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. Compared to other companies in the Communications Equipment industry and the overall market, COMMUNICATIONS SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to -$3.48 million or 20.78% 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.
- The gross profit margin for COMMUNICATIONS SYSTEMS INC is currently lower than what is desirable, coming in at 30.95%. Regardless of JCS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, JCS's net profit margin of -10.00% significantly underperformed when compared to the industry average.
- JCS'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 30.58%, 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.
- COMMUNICATIONS SYSTEMS INC has improved earnings per share by 41.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COMMUNICATIONS SYSTEMS INC swung to a loss, reporting -$1.11 versus $0.23 in the prior year. This year, the market expects an improvement in earnings (-$0.29 versus -$1.11).
- You can view the full Communications Systems Ratings Report.
- Our dividend calendar.