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.