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 9.10%. 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 7.19. The average volume for TCP Capital has been 254,100 shares per day over the past 30 days. TCP Capital has a market cap of $419.5 million and is part of the real estate industry. Shares are up 6.8% year to date as of the close of trading on Wednesday. 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 came in higher than the industry average of 12.7%. Since the same quarter one year prior, revenues rose by 30.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TCP CAPITAL CORP has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.60 versus $1.20).
- The gross profit margin for TCP CAPITAL CORP is currently very high, coming in at 81.49%. Regardless of TCPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCPC's net profit margin of 67.51% significantly outperformed against the industry.
- 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.
- In its most recent trading session, TCPC 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. 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.
- You can view the full TCP Capital Ratings Report.
- The revenue growth came in higher than the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 8.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DOM 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 70.03, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DOMINION RES BLACK WARRIOR is currently very high, coming in at 100.00%. DOM has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, DOM's net profit margin of 77.13% significantly outperformed against the industry.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, DOMINION RES BLACK WARRIOR's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- DOM has underperformed the S&P 500 Index, declining 10.87% from its price level of one year ago. 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 Dominion Resources Black Warrior Ratings Report.
- GSJK's revenue growth has slightly outpaced the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 12.7%. 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.
- GSJK's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.44, which illustrates the ability to avoid short-term cash problems.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 31.2% when compared to the same quarter one year ago, falling from $3.60 million to $2.48 million.
- Net operating cash flow has decreased to $6.63 million or 45.72% 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 Compressco Partners Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 209.5% when compared to the same quarter one year prior, rising from -$37.81 million to $41.41 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 Chemicals industry and the overall market, PETROLOGISTICS LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- PETROLOGISTICS 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, PETROLOGISTICS LP reported poor results of -$0.41 versus -$0.02 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus -$0.41).
- The debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, PDH has managed to keep a strong quick ratio of 2.29, which demonstrates the ability to cover short-term cash needs.
- In its most recent trading session, PDH 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 PetroLogistics Ratings Report.
- Our dividend calendar.