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 3 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 9.98. The average volume for Solar Capital has been 372,700 shares per day over the past 30 days. Solar Capital has a market cap of $993.6 million and is part of the financial services industry. Shares are down 7.7% year to date as of the close of trading on Monday. 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 12.5%. 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 7.88%.
- 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.
- The revenue growth came in higher than the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 7.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MARTIN MIDSTREAM PARTNERS LP 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, MARTIN MIDSTREAM PARTNERS LP increased its bottom line by earning $1.33 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($1.86 versus $1.33).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, MARTIN MIDSTREAM PARTNERS LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Powered by its strong earnings growth of 83.33% and other important driving factors, this stock has surged by 30.36% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 9.5% when compared to the same quarter one year ago, dropping from $10.03 million to $9.08 million.
- You can view the full Martin Midstream Partners L.P Ratings Report.
- NMM's revenue growth trails the industry average of 17.1%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.26, which clearly demonstrates the ability to cover short-term cash needs.
- 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 Marine industry and the overall market, NAVIOS MARITIME PARTNERS LP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for NAVIOS MARITIME PARTNERS LP is currently very high, coming in at 92.56%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.69% significantly outperformed against the industry average.
- NAVIOS MARITIME PARTNERS LP'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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NAVIOS MARITIME PARTNERS LP increased its bottom line by earning $1.64 versus $1.19 in the prior year. For the next year, the market is expecting a contraction of 52.1% in earnings ($0.79 versus $1.64).
- You can view the full Navios Maritime Partners L.P Ratings Report.
- Our dividend calendar.