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." Ship Finance International Dividend Yield: 12.10% Ship Finance International (NYSE: SFL) shares currently have a dividend yield of 12.10%. Ship Finance International Limited owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. It is also involved in the charter, purchase, and sale of assets. The company has a P/E ratio of 7.92. The average volume for Ship Finance International has been 844,900 shares per day over the past 30 days. Ship Finance International has a market cap of $1.4 billion and is part of the transportation industry. Shares are down 9.3% year-to-date as of the close of trading on Thursday. 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 Ship Finance International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. 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 weak operating cash flow. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 23.9%. Since the same quarter one year prior, revenues rose by 30.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SHIP FINANCE INTL LTD has improved earnings per share by 31.3% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SHIP FINANCE INTL LTD increased its bottom line by earning $1.87 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $1.87).
- SFL has underperformed the S&P 500 Index, declining 11.77% 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.
- The debt-to-equity ratio of 1.39 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.58, which shows the ability to cover short-term cash needs.
- You can view the full Ship Finance International Ratings Report.
- MPLX's very impressive revenue growth greatly exceeded the industry average of 23.9%. Since the same quarter one year prior, revenues leaped by 200.5%. 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 significantly increased by 404.27% to $295.00 million when compared to the same quarter last year. In addition, MPLX LP has also vastly surpassed the industry average cash flow growth rate of -49.64%.
- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.34 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.04%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 163.46% 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 230.4% when compared to the same quarter one year ago, falling from $46.00 million to -$60.00 million.
- You can view the full MPLX Ratings Report.
- The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 5.3%. 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.
- 36.16% is the gross profit margin for CF INDUSTRIES HOLDINGS INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.58% trails the industry average.
- 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 Chemicals industry. The net income has significantly decreased by 88.7% when compared to the same quarter one year ago, falling from $230.60 million to $26.00 million.
- Net operating cash flow has decreased to $346.00 million or 34.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full CF Industries Holdings Ratings Report.
- Our dividend calendar.