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." Full Circle Capital Corp BDC (NASDAQ: FULL) shares currently have a dividend yield of 11.60%. Full Circle Capital Corporation is a business development company and operates as an externally managed non-diversified closed-end management investment company. The company has a P/E ratio of 46.94. The average volume for Full Circle Capital Corp BDC has been 63,200 shares per day over the past 30 days. Full Circle Capital Corp BDC has a market cap of $60.4 million and is part of the financial services industry. Shares are up 7.4% year to date as of the close of trading on Monday. TheStreet Ratings rates Full Circle Capital Corp BDC as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- FULL's revenue growth has slightly outpaced the industry average of 6.0%. 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 61.87%. 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.
- FULL CIRCLE CAPITAL CORP's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP reported lower earnings of $0.44 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.78 versus $0.44).
- 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 Capital Markets industry average. The net income has decreased by 2.8% when compared to the same quarter one year ago, dropping from $1.52 million to $1.48 million.
- 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.
- You can view the full Full Circle Capital Corp BDC Ratings Report.