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." Dynagas LNG Partners Dividend Yield: 12.20% Dynagas LNG Partners (NYSE: DLNG) shares currently have a dividend yield of 12.20%. Dynagas LNG Partners LP, through its subsidiaries, operates in the seaborne transportation industry worldwide. The company owns and operates liquefied natural gas (LNG) vessels. The company has a P/E ratio of 8.41. The average volume for Dynagas LNG Partners has been 147,700 shares per day over the past 30 days. Dynagas LNG Partners has a market cap of $492.6 million and is part of the transportation industry. Shares are up 40.6% 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 Dynagas LNG Partners as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, generally high debt management risk and weak operating cash flow. Highlights from the ratings report include:
- DLNG has underperformed the S&P 500 Index, declining 7.62% 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 is very high at 2.01 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, DLNG's quick ratio is somewhat strong at 1.03, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has decreased to $23.64 million or 10.40% when compared to the same quarter last year. Despite a decrease in cash flow DYNAGAS LNG PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -49.98%.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DYNAGAS LNG PARTNERS LP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- DYNAGAS LNG PARTNERS LP's earnings per share improvement from the most recent quarter was slightly positive. 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, DYNAGAS LNG PARTNERS LP increased its bottom line by earning $1.60 versus $1.58 in the prior year. This year, the market expects an improvement in earnings ($1.74 versus $1.60).
- You can view the full Dynagas LNG Partners Ratings Report.
- DESWELL INDUSTRIES INC 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 suffered a declining pattern earnings per share over the past two years. During the past fiscal year, DESWELL INDUSTRIES INC reported poor results of -$0.31 versus -$0.14 in the prior year.
- 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 Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 9000.0% when compared to the same quarter one year ago, falling from $0.01 million to -$1.16 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, DESWELL INDUSTRIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DESWELL INDUSTRIES INC is rather low; currently it is at 21.88%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -13.75% is significantly below that of the industry average.
- The share price of DESWELL INDUSTRIES INC has not done very well: it is down 13.34% 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. 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.
- You can view the full Deswell Industries Ratings Report.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 103.1% when compared to the same quarter one year ago, falling from $321.50 million to -$9.99 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 Real Estate Investment Trusts (REITs) industry and the overall market, ASHFORD HOSPITALITY TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ASHFORD HOSPITALITY TRUST is currently extremely low, coming in at 10.89%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.74% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 106.38% 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.
- ASHFORD HOSPITALITY 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ASHFORD HOSPITALITY TRUST turned its bottom line around by earning $2.33 versus -$0.73 in the prior year. For the next year, the market is expecting a contraction of 126.6% in earnings (-$0.62 versus $2.33).
- You can view the full Ashford Hospitality Ratings Report.
- Our dividend calendar.