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."Global Partners Dividend Yield: 14.10% Global Partners (NYSE: GLP) shares currently have a dividend yield of 14.10%. Global Partners LP, a midstream logistics and marketing company, distributes gasoline, distillates, residual oil, and renewable fuels to wholesalers, retailers, and commercial customers in the New England states and New York. The average volume for Global Partners has been 145,000 shares per day over the past 30 days. Global Partners has a market cap of $446.0 million and is part of the wholesale industry. Shares are down 25.4% year-to-date as of the close of trading on Wednesday. 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 Global 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, feeble growth in its earnings per share, deteriorating net income, generally high debt management risk and disappointing return on equity. Highlights from the ratings report include:
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.81%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 122.82% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- GLOBAL PARTNERS LP 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, GLOBAL PARTNERS LP reported lower earnings of $1.16 versus $3.96 in the prior year. For the next year, the market is expecting a contraction of 135.8% in earnings (-$0.42 versus $1.16).
- 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 123.1% when compared to the same quarter one year ago, falling from $30.42 million to -$7.02 million.
- The debt-to-equity ratio is very high at 2.17 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, GLP has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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, GLOBAL PARTNERS LP'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.
- You can view the full Global Partners 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 230.4% when compared to the same quarter one year ago, falling from -$5.13 million to -$16.95 million.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, FIVE OAKS INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $0.65 million or 70.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The share price of FIVE OAKS INVESTMENT CORP has not done very well: it is down 20.49% 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.
- FIVE OAKS INVESTMENT CORP 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. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIVE OAKS INVESTMENT CORP reported poor results of -$0.21 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus -$0.21).
- You can view the full Five Oaks Investment 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 Capital Markets industry and the overall market, INSTITUTIONAL FINANCIAL MKTS's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for INSTITUTIONAL FINANCIAL MKTS is currently extremely low, coming in at 9.80%. Regardless of IFMI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IFMI's net profit margin of 1.44% is significantly lower than the industry average.
- IFMI'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 34.62%, 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.
- INSTITUTIONAL FINANCIAL MKTS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, INSTITUTIONAL FINANCIAL MKTS reported poor results of -$0.28 versus -$0.17 in the prior year.
- Net operating cash flow has increased to -$7.13 million or 24.08% when compared to the same quarter last year. Despite an increase in cash flow of 24.08%, INSTITUTIONAL FINANCIAL MKTS is still growing at a significantly lower rate than the industry average of 100.83%.
- You can view the full Institutional Financial Markets Ratings Report.
- Our dividend calendar.