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 "Buy." Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 7.30%. Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 9.95. The average volume for Solar Capital has been 387,000 shares per day over the past 30 days. Solar Capital has a market cap of $990.4 million and is part of the financial services industry. Shares are down 8% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Solar Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.4%. Since the same quarter one year prior, revenues rose by 12.4%. 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.
- Net operating cash flow has significantly increased by 114.82% to $6.58 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of 7.92%.
- The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 61.50%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of -0.03% significantly underperformed when compared to 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. When compared to other companies in the Capital Markets industry and the overall market, SOLAR CAPITAL LTD's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Solar Capital Ratings Report.
- TCRD's very impressive revenue growth greatly exceeded the industry average of 12.4%. Since the same quarter one year prior, revenues leaped by 92.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- THL CREDIT INC 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. We feel that this trend should continue. During the past fiscal year, THL CREDIT INC increased its bottom line by earning $1.26 versus $1.19 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.26).
- 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 161.7% when compared to the same quarter one year prior, rising from $5.97 million to $15.62 million.
- The gross profit margin for THL CREDIT INC is rather high; currently it is at 68.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 68.87% significantly outperformed against the industry average.
- 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 THL Credit Ratings Report.
- MARPS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign.
- The gross profit margin for MARINE PETROLEUM TRUST is currently very high, coming in at 100.00%. MARPS has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MARPS's net profit margin of 97.08% significantly outperformed against the industry.
- MARINE PETROLEUM TRUST's earnings per share declined by 24.5% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MARINE PETROLEUM TRUST increased its bottom line by earning $1.92 versus $1.59 in the prior year.
- MARPS, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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, MARINE PETROLEUM TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Marine Petroleum Ratings Report.
- SUP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.18, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has increased to $28.00 million or 13.88% when compared to the same quarter last year. In addition, SUPERIOR INDUSTRIES INTL has also modestly surpassed the industry average cash flow growth rate of 13.19%.
- SUP, with its decline in revenue, underperformed when compared the industry average of 7.4%. Since the same quarter one year prior, revenues slightly dropped by 7.5%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- The gross profit margin for SUPERIOR INDUSTRIES INTL is currently extremely low, coming in at 11.68%. Regardless of SUP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.17% trails the industry average.
- In its most recent trading session, SUP 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 stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full Superior Industries International Ratings Report.
- Our dividend calendar.