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 5 stocks with substantial yields, that ultimately, we have rated "Hold."Educational Development Corporation (NASDAQ: EDUC) shares currently have a dividend yield of 9.00%. Educational Development Corporation operates as a trade publisher of the line of children's books in the United States. The company has a P/E ratio of 17.80. The average volume for Educational Development Corporation has been 6,800 shares per day over the past 30 days. Educational Development Corporation has a market cap of $14.1 million and is part of the media industry. Shares are down 6.6% year to date as of the close of trading on Friday. TheStreet Ratings rates Educational Development Corporation as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 61.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.68% is above that of the industry average.
- EDUC's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
- The share price of EDUCATIONAL DEVELOPMENT CORP has not done very well: it is down 20.54% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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 Distributors industry. The net income has significantly decreased by 27.4% when compared to the same quarter one year ago, falling from $0.73 million to $0.53 million.
- You can view the full Educational Development Corporation Ratings Report.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.5%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.56, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.92 is weak.
- The gross profit margin for RHINO RESOURCE PARTNERS LP is currently lower than what is desirable, coming in at 27.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.23% is significantly below that of the industry average.
- Net operating cash flow has decreased to $10.60 million or 37.83% 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 Rhino Resource Partners Ratings Report.
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 7.8%. 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 FULL CIRCLE CAPITAL CORP is rather high; currently it is at 61.90%. Regardless of FULL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FULL's net profit margin of 49.15% 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. 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.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, FULL CIRCLE CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to -$4.21 million or 417.79% 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.
- Net operating cash flow has increased to $313.89 million or 14.03% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.37%.
- The gross profit margin for ANWORTH MTG ASSET CORP is currently very high, coming in at 91.00%. Regardless of ANH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ANH's net profit margin of 54.18% significantly outperformed against the industry.
- ANWORTH MTG ASSET CORP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ANWORTH MTG ASSET CORP reported lower earnings of $0.68 versus $0.90 in the prior year. For the next year, the market is expecting a contraction of 22.1% in earnings ($0.53 versus $0.68).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ANWORTH MTG ASSET CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Anworth Mortgage Asset Corporation Ratings Report.
- BBEP's very impressive revenue growth greatly exceeded the industry average of 10.5%. Since the same quarter one year prior, revenues leaped by 63.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 27.4% when compared to the same quarter one year prior, rising from -$49.97 million to -$36.30 million.
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- Net operating cash flow has decreased to $58.85 million or 17.45% when compared to the same quarter last year. Despite a decrease in cash flow of 17.45%, BREITBURN ENERGY PARTNERS LP is in line with the industry average cash flow growth rate of -25.48%.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BREITBURN ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full BreitBurn Energy Partners Ratings Report.
- Our dividend calendar.