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: 9.20% NuStar GP Holdings (NYSE: NSH) shares currently have a dividend yield of 9.20%. 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 16.34. The average volume for NuStar GP Holdings has been 123,100 shares per day over the past 30 days. NuStar GP Holdings has a market cap of $1.0 billion and is part of the energy industry. Shares are up 9% 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 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 29.97%, 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 -49.98%.
- You can view the full NuStar GP Holdings Ratings Report.
- The revenue growth came in higher than the industry average of 13.7%. Since the same quarter one year prior, revenues slightly increased by 2.5%. 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.
- The gross profit margin for GLADSTONE CAPITAL CORP is currently very high, coming in at 72.46%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -64.91% is in-line with the industry average.
- Net operating cash flow has significantly increased by 90.50% to -$2.60 million when compared to the same quarter last year. Despite an increase in cash flow, GLADSTONE CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 100.83%.
- 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 164.3% when compared to the same quarter one year ago, falling from $9.54 million to -$6.14 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, GLADSTONE CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Gladstone Capital Ratings Report.
- VOC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign.
- The gross profit margin for VOC ENERGY TRUST is currently very high, coming in at 100.00%. VOC has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, VOC's net profit margin of 76.80% significantly outperformed against the industry.
- VOC, with its decline in revenue, underperformed when compared the industry average of 24.0%. Since the same quarter one year prior, revenues fell by 44.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, VOC ENERGY TRUST's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- VOC ENERGY TRUST's earnings per share declined by 50.0% in the most recent quarter compared to 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, VOC ENERGY TRUST reported lower earnings of $0.47 versus $1.85 in the prior year.
- You can view the full VOC Energy Ratings Report.
- Our dividend calendar.