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 and 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." Full Circle Capital Corp BDC (NASDAQ: FULL) shares currently have a dividend yield of 12.00%. Full Circle Capital Corporation is a business development company and operates as an externally managed non-diversified closed-end management investment company. The company has a P/E ratio of 38.50. Currently there are no analysts that rate Full Circle Capital Corp BDC a buy, no analysts rate it a sell, and 1 rates it a hold. The average volume for Full Circle Capital Corp BDC has been 83,500 shares per day over the past 30 days. Full Circle Capital Corp BDC has a market cap of $58.3 million and is part of the financial services industry. Shares are up 4.3% year to date as of the close of trading on Friday. TheStreet Ratings rates Full Circle Capital Corp BDC as a hold. The company's strongest point has been its very decent return on equity which we feel should persist. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- The revenue fell significantly faster than the industry average of 9.8%. Since the same quarter one year prior, revenues fell by 22.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- FULL CIRCLE CAPITAL CORP has exprienced 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP reported lower earnings of $0.44 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.81 versus $0.44).
- In its most recent trading session, FULL 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The gross profit margin for FULL CIRCLE CAPITAL CORP is currently extremely low, coming in at 1.30%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -35.51% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$1.80 million or 146.56% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Full Circle Capital Corp BDC Ratings Report.