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." BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 10.60%. BlackRock Kelso Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm invests in all industries. The company has a P/E ratio of 11.17. The average volume for BlackRock Kelso Capital Corporation has been 699,000 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $728.4 million and is part of the financial services industry. Shares are down 2.3% year to date as of the close of trading on Thursday. TheStreet Ratings rates BlackRock Kelso Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 46.8% when compared to the same quarter one year prior, rising from $20.30 million to $29.80 million.
- Net operating cash flow has significantly increased by 327.10% to $49.61 million when compared to the same quarter last year. In addition, BLACKROCK KELSO CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -343.15%.
- The gross profit margin for BLACKROCK KELSO CAPITAL CORP is rather high; currently it is at 58.10%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, BKCC's net profit margin of 95.71% significantly outperformed against the industry.
- 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. 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 BlackRock Kelso Capital Corporation Ratings Report.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- ALTO PALERMO SA 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 two years. During the past fiscal year, ALTO PALERMO SA increased its bottom line by earning $1.15 versus $0.53 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Management & Development industry. The net income increased by 131.9% when compared to the same quarter one year prior, rising from $7.08 million to $16.42 million.
- 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 Real Estate Management & Development industry and the overall market, ALTO PALERMO SA's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for ALTO PALERMO SA is currently very high, coming in at 94.30%. It has increased significantly from the same period last year. Along with this, the net profit margin of 31.40% significantly outperformed against the industry average.
- You can view the full Alto Palermo Ratings Report.
- MCC's very impressive revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues leaped by 102.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 35.27% 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, MCC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- MEDLEY CAPITAL CORP has improved earnings per share by 17.6% 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, MEDLEY CAPITAL CORP increased its bottom line by earning $1.24 versus $0.55 in the prior year. This year, the market expects an improvement in earnings ($1.49 versus $1.24).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 97.4% when compared to the same quarter one year prior, rising from $5.84 million to $11.52 million.
- The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 66.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 57.01% significantly outperformed against the industry average.
- You can view the full Medley Capital Ratings Report.
- Our dividend calendar.