Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.
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: 13.90%
) shares currently have a dividend yield of 13.90%.
Ellington Financial LLC, a specialty finance company, acquires and manages mortgage-related assets, including residential mortgage backed securities backed by prime jumbo, Alt-A, manufactured housing and subprime residential mortgage loans, and residential mortgage-backed securities. The company has a P/E ratio of 8.48.
The average volume for Ellington Financial has been 274,800 shares per day over the past 30 days. Ellington Financial has a market cap of $743.1 million and is part of the real estate industry. Shares are down 0.9% year-to-date as of the close of trading on Wednesday.
TheStreet Ratings rates
. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
Highlights from the ratings report include:
- EFC's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for ELLINGTON FINANCIAL LLC is currently very high, coming in at 73.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 99.76% significantly outperformed against the industry average.
- In its most recent trading session, EFC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- 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. When compared to other companies in the Capital Markets industry and the overall market, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ellington Financial Ratings Report.
Dividend Yield: 7.10%
) shares currently have a dividend yield of 7.10%.
Keating Capital, Inc. is a business development company specializing in later stage, emerging growth, growth capital, pre-IPO and secondary purchase investments. It seeks to invest in micro-cap and small-cap private companies that are committed to and capable of becoming public. The company has a P/E ratio of 15.72.
The average volume for BDCA Venture has been 16,400 shares per day over the past 30 days. BDCA Venture has a market cap of $55.4 million and is part of the financial services industry. Shares are down 8% year-to-date as of the close of trading on Friday.
Dividend Yield: 9.60%
) shares currently have a dividend yield of 9.60%.
Gladstone Capital Corporation is a business development company specializing in investments in debt and equity securities. The company has a P/E ratio of 10.96.
The average volume for Gladstone Capital has been 153,900 shares per day over the past 30 days. Gladstone Capital has a market cap of $184.2 million and is part of the financial services industry. Shares are down 8.8% year-to-date as of the close of trading on Wednesday.
TheStreet Ratings rates
. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 19.1%. 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.
- Net operating cash flow has increased to $11.11 million or 10.62% when compared to the same quarter last year. In addition, GLADSTONE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -89.21%.
- The gross profit margin for GLADSTONE CAPITAL CORP is rather high; currently it is at 69.00%. Regardless of GLAD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GLAD's net profit margin of -198.18% significantly underperformed when compared to the industry average.
- The share price of GLADSTONE CAPITAL CORP has not done very well: it is down 6.16% 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.
- 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 879.8% when compared to the same quarter one year ago, falling from -$2.06 million to -$20.18 million.
- You can view the full Gladstone Capital Ratings Report.
Other helpful dividend tools from TheStreet:
- Our dividend calendar.