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 4 stocks with substantial yields, that ultimately, we have rated "Hold." KKR Financial Holdings (NYSE: KFN) shares currently have a dividend yield of 8.00%. KKR Financial Holdings LLC, together with its subsidiaries, operates as a specialty finance company with expertise in a range of asset classes. The company has a P/E ratio of 5.69. The average volume for KKR Financial Holdings has been 848,800 shares per day over the past 30 days. KKR Financial Holdings has a market cap of $2.2 billion and is part of the real estate industry. Shares are down 1.9% year to date as of the close of trading on Wednesday. TheStreet Ratings rates KKR Financial Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 17.2%. 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 KKR FINANCIAL HOLDINGS LLC is currently very high, coming in at 77.40%. It has increased significantly from the same period last year. Along with this, the net profit margin of 40.33% significantly outperformed against the industry average.
- 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 Diversified Financial Services industry average. The net income increased by 11.7% when compared to the same quarter one year prior, going from $88.05 million to $98.34 million.
- Net operating cash flow has decreased to $39.68 million or 11.26% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 2.43 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full KKR Financial Holdings Ratings Report.
- NKA's share price has surged by 30.24% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- NISKA GAS STORAGE PARTNERS 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. 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, NISKA GAS STORAGE PARTNERS continued to lose money by earning -$0.63 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus -$0.63).
- The revenue fell significantly faster than the industry average of 10.6%. Since the same quarter one year prior, revenues fell by 44.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for NISKA GAS STORAGE PARTNERS is rather high; currently it is at 56.70%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NKA's net profit margin of -2.83% significantly underperformed when compared to the industry average.
- 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 108.2% when compared to the same quarter one year ago, falling from $15.64 million to -$1.28 million.
- You can view the full Niska Gas Storage Partners Ratings Report.
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 75.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VLY's net profit margin of 16.98% significantly trails the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Commercial Banks industry average. The net income has decreased by 9.3% when compared to the same quarter one year ago, dropping from $34.53 million to $31.31 million.
- Net operating cash flow has significantly decreased to $40.34 million or 71.47% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Valley National Bancorp Ratings Report.
- The revenue growth greatly exceeded the industry average of 6.3%. 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 ($1.69 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 -343.15%.
- 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.
- Our dividend calendar.