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." TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 8.80%. 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 13.47 The average volume for TCP Capital has been 304,900 shares per day over the past 30 days TCP Capital has a market cap of $350.1 million and is part of the real estate industry Shares are up 10.6% year to date as of the close of trading on Friday 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 5.9%. 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 ($1.74 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 -283.76%.
- 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.
- QCCO's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, QCCO has a quick ratio of 2.47, which demonstrates the ability of the company to cover short-term liquidity needs.
- QCCO, with its decline in revenue, slightly underperformed the industry average of 4.1%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for QC HOLDINGS INC is currently lower than what is desirable, coming in at 34.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.79% significantly trails the industry average.
- Net operating cash flow has declined marginally to $15.18 million or 7.88% 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 QC Holdings Ratings Report.
- The revenue growth came in higher than the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 27.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, DYNEX CAPITAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- DYNEX CAPITAL INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DYNEX CAPITAL INC increased its bottom line by earning $1.36 versus $1.05 in the prior year. For the next year, the market is expecting a contraction of 3.7% in earnings ($1.31 versus $1.36).
- In its most recent trading session, DX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- You can view the full Dynex Capital Ratings Report.
- BBEP's very impressive revenue growth greatly exceeded the industry average of 10.7%. 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.
- BREITBURN ENERGY PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to 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, BREITBURN ENERGY PARTNERS LP swung to a loss, reporting -$0.60 versus $1.61 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus -$0.60).
- 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 -25.63%.
- 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.