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 "Buy." Nam Tai Electronics (NYSE: NTE) shares currently have a dividend yield of 7.30%. Nam Tai Electronics, Inc. provides electronics manufacturing and design services to the original equipment manufacturers of telecommunication and consumer electronic products. The company has a P/E ratio of 5.14. The average volume for Nam Tai Electronics has been 665,500 shares per day over the past 30 days. Nam Tai Electronics has a market cap of $366.0 million and is part of the electronics industry. Shares are down 41.3% year to date as of the close of trading on Monday. TheStreet Ratings rates Nam Tai Electronics as a buy. 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, notable return on equity, reasonable valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- NTE's very impressive revenue growth greatly exceeded the industry average of 1.6%. Since the same quarter one year prior, revenues leaped by 102.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NTE's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NTE has a quick ratio of 1.95, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 Electronic Equipment, Instruments & Components industry and the overall market, NAM TAI ELECTRONIC's return on equity exceeds that of both the industry average and the S&P 500.
- Powered by its strong earnings growth of 1000.00% and other important driving factors, this stock has surged by 62.60% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NTE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full Nam Tai Electronics Ratings Report.
- The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 17.3%. 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 -$19.37 million or 45.15% when compared to the same quarter last year. In addition, GOLUB CAPITAL BDC INC has also vastly surpassed the industry average cash flow growth rate of -120.45%.
- The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 70.80%. Regardless of GBDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GBDC's net profit margin of 55.80% significantly outperformed against the industry.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 7.2% when compared to the same quarter one year prior, going from $11.43 million to $12.25 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Golub Capital BDC Inc. Class B Ratings Report.
- The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 23.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.22, which illustrates the ability to avoid short-term cash problems.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 81.53% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, OMAB should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- GRUPO AEROPORTUARIO DEL CENT has improved earnings per share by 25.0% 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. During the past fiscal year, GRUPO AEROPORTUARIO DEL CENT increased its bottom line by earning $1.27 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $1.27).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Transportation Infrastructure industry. The net income increased by 19.9% when compared to the same quarter one year prior, going from $16.21 million to $19.43 million.
- You can view the full Central North Airport Group Ratings Report.
- Our dividend calendar.