What To Hold: 3 Hold-Rated Dividend Stocks CPTA, BGSF, SDLP
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."
Dividend Yield: 14.00%
(NASDAQ:
) shares currently have a dividend yield of 14.00%.
Capitala Finance Corp. is a Business Development Company specializing in investments in traditional mezzanine, senior subordinated and unitranche debt, second-lien loans, equity securities issued by lower and traditional middle-market companies, and small and middle-market companies. The company has a P/E ratio of 74.50.
The average volume for Capitala Finance has been 81,100 shares per day over the past 30 days. Capitala Finance has a market cap of $216.5 million and is part of the financial services industry. Shares are down 23.9% year-to-date as of the close of trading on Tuesday.
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TheStreet Ratings rates
Capitala Finance
as a
. The company's strengths can be seen in multiple areas, such as its robust revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.7%. Since the same quarter one year prior, revenues rose by 20.4%. 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 CAPITALA FINANCE CORP is rather high; currently it is at 66.28%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 32.76% significantly outperformed against the industry average.
- CAPITALA FINANCE CORP's earnings per share declined by 35.4% 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAPITALA FINANCE CORP swung to a loss, reporting -$0.27 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus -$0.27).
- Net operating cash flow has significantly decreased to -$25.26 million or 535.71% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.63%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 35.41% 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.
- You can view the full Capitala Finance Ratings Report.
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Dividend Yield: 7.80%
(AMEX:
) shares currently have a dividend yield of 7.80%.
BG Staffing, Inc. operates as a temporary staffing company in the United States. It operates through three segments: Light Industrial, Multifamily, and IT Staffing. The company has a P/E ratio of 21.15.
The average volume for BG Staffing has been 3,500 shares per day over the past 30 days. BG Staffing has a market cap of $95.3 million and is part of the diversified services industry. Shares are up 4.8% year-to-date as of the close of trading on Tuesday.
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TheStreet Ratings rates
BG Staffing
as a
. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.0%. Since the same quarter one year prior, revenues rose by 25.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.98, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, BGSF has a quick ratio of 1.89, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 249.13% to $2.02 million when compared to the same quarter last year. In addition, BG STAFFING INC has also vastly surpassed the industry average cash flow growth rate of 27.96%.
- The gross profit margin for BG STAFFING INC is rather low; currently it is at 23.03%. Regardless of BGSF's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.68% trails the industry average.
- You can view the full BG Staffing Ratings Report.
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Dividend Yield: 19.70%
(NYSE:
) shares currently have a dividend yield of 19.70%.
Seadrill Partners LLC owns, operates, and acquires offshore drilling units. The company primarily serves various oil and gas companies. As of March 31, 2015, its fleet consisted of four semi-submersible drilling rigs, three drillships, and three tender rigs. The company has a P/E ratio of 5.36.
The average volume for Seadrill Partners has been 361,100 shares per day over the past 30 days. Seadrill Partners has a market cap of $868.0 million and is part of the energy industry. Shares are down 25.7% year-to-date as of the close of trading on Tuesday.
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TheStreet Ratings rates
Seadrill Partners
as a
. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 31.4%. Since the same quarter one year prior, revenues rose by 20.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL PARTNERS LLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- SEADRILL PARTNERS LLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEADRILL PARTNERS LLC reported lower earnings of $1.72 versus $1.86 in the prior year. This year, the market expects an improvement in earnings ($3.04 versus $1.72).
- SDLP'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 59.39%, 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. 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 debt-to-equity ratio is very high at 4.08 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, SDLP has a quick ratio of 0.65, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Seadrill Partners Ratings Report.
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Other helpful dividend tools from TheStreet:
- Our dividend calendar.