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 "Hold." BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 10.80%. BlackRock Kelso Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm invests in all industries. The company has a P/E ratio of 12.66. The average volume for BlackRock Kelso Capital Corporation has been 494,500 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $714.2 million and is part of the financial services industry. Shares are down 4.4% year to date as of the close of trading on Friday. TheStreet Ratings rates BlackRock Kelso Capital Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- BKCC's revenue growth trails the industry average of 12.3%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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 BLACKROCK KELSO CAPITAL CORP is currently very high, coming in at 73.70%. Regardless of BKCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BKCC's net profit margin of 33.27% significantly outperformed against the industry.
- 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 Capital Markets industry. The net income has significantly decreased by 42.7% when compared to the same quarter one year ago, falling from $20.98 million to $12.02 million.
- 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 Capital Markets industry and the overall market, BLACKROCK KELSO CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full BlackRock Kelso Capital Corporation Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 26.9% when compared to the same quarter one year prior, rising from $16.18 million to $20.52 million.
- The gross profit margin for LRR ENERGY LP is currently very high, coming in at 81.08%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 49.59% significantly outperformed against the industry average.
- LRR ENERGY LP has improved earnings per share by 44.4% 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, LRR ENERGY LP reported lower earnings of $0.00 versus $2.42 in the prior year. This year, the market expects an increase in earnings to $1.07 from $0.00.
- Net operating cash flow has decreased to $17.26 million or 16.31% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, LRR ENERGY LP has marginally lower results.
- 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, LRR ENERGY LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full LRR Energy Ratings Report.
- DSWL 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 4.13, which clearly demonstrates the ability to cover short-term cash needs.
- DSWL, with its decline in revenue, underperformed when compared the industry average of 2.7%. Since the same quarter one year prior, revenues fell by 23.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for DESWELL INDUSTRIES INC is rather low; currently it is at 15.76%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -15.46% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$1.12 million or 252.65% 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 Deswell Industries Ratings Report.
- Our dividend calendar.