Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. 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 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."TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 9.20%. TCP Capital Corp. is a business development company specializing in investments in debt of public and private middle market companies. The fund also provides leveraged loans. It seeks to invests in the United States. The company has a P/E ratio of 12.93. The average volume for TCP Capital has been 94,200 shares per day over the past 30 days. TCP Capital has a market cap of $335.9 million and is part of the real estate industry. Shares are up 6.1% year to date as of the close of trading on Tuesday. TheStreet Ratings rates TCP Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 42.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TCP CAPITAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.59 versus $1.20).
- Net operating cash flow has remained constant at $6.11 million with no significant change when compared to the same quarter last year. Even though TCP CAPITAL CORP's cash flow growth was minimal, the firm managed to surpass its industry's average growth rate of -119.43%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- When compared to other companies in the Capital Markets industry and the overall market, TCP CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full TCP Capital Ratings Report.
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 36.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 61.11% and other important driving factors, this stock has surged by 65.52% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although GSJK had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- COMPRESSCO PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, COMPRESSCO PARTNERS LP increased its bottom line by earning $1.04 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($1.35 versus $1.04).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 64.0% when compared to the same quarter one year prior, rising from $2.77 million to $4.54 million.
- 43.50% is the gross profit margin for COMPRESSCO PARTNERS LP which we consider to be strong. Regardless of GSJK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GSJK's net profit margin of 14.75% compares favorably to the industry average.
- You can view the full Compressco Partners Ratings Report.
- DOM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 92.70, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DOMINION RES BLACK WARRIOR is currently very high, coming in at 100.00%. DOM has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, DOM's net profit margin of 81.10% significantly outperformed against the industry.
- DOM, with its decline in revenue, underperformed when compared the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 36.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- DOMINION RES BLACK WARRIOR's earnings per share declined by 39.1% 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 two years. During the past fiscal year, DOMINION RES BLACK WARRIOR reported lower earnings of $0.54 versus $0.93 in the prior year.
- 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 41.8% when compared to the same quarter one year ago, falling from $1.84 million to $1.07 million.
- You can view the full Dominion Resources Black Warrior Ratings Report.
- Our dividend calendar.