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." KKR Financial Holdings (NYSE: KFN) shares currently have a dividend yield of 9.20%. KKR Financial Holdings LLC, together with its subsidiaries, operates as a specialty finance company with expertise in a range of asset classes. The company has a P/E ratio of 6.86. The average volume for KKR Financial Holdings has been 904,300 shares per day over the past 30 days. KKR Financial Holdings has a market cap of $2.0 billion and is part of the real estate industry. Shares are down 9.1% year to date as of the close of trading on Thursday. TheStreet Ratings rates KKR Financial Holdings as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The gross profit margin for KKR FINANCIAL HOLDINGS LLC is currently very high, coming in at 73.47%. Regardless of KFN's high profit margin, it has managed to decrease from the same period last year.
- KKR FINANCIAL HOLDINGS LLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KKR FINANCIAL HOLDINGS LLC increased its bottom line by earning $1.88 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 33.5% in earnings ($1.25 versus $1.88).
- Although KFN's debt-to-equity ratio of 2.32 is very high, it is currently less than that of the industry average.
- You can view the full KKR Financial Holdings Ratings Report.
- OZM's very impressive revenue growth greatly exceeded the industry average of 8.7%. Since the same quarter one year prior, revenues leaped by 52.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 115.73% and other important driving factors, this stock has surged by 39.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- OCH-ZIFF CAPITAL MGMT 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. This trend suggests that the performance of the business is improving. During the past fiscal year, OCH-ZIFF CAPITAL MGMT LP continued to lose money by earning -$2.24 versus -$4.08 in the prior year. This year, the market expects an improvement in earnings ($1.45 versus -$2.24).
- 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 119.5% when compared to the same quarter one year prior, rising from -$127.51 million to $24.90 million.
- The gross profit margin for OCH-ZIFF CAPITAL MGMT LP is rather high; currently it is at 58.38%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.69% trails the industry average.
- You can view the full Och-Ziff Capital Management Group Ratings Report.
- RNO, with its decline in revenue, underperformed when compared the industry average of 5.5%. Since the same quarter one year prior, revenues fell by 24.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for RHINO RESOURCE PARTNERS LP is currently lower than what is desirable, coming in at 29.46%. Regardless of RNO'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 4.04% trails the industry average.
- Despite currently having a low debt-to-equity ratio of 0.50, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that RNO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.65 is low and demonstrates weak liquidity.
- Net operating cash flow has significantly decreased to $11.14 million or 54.86% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The share price of RHINO RESOURCE PARTNERS LP has not done very well: it is down 8.85% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Rhino Resource Partners Ratings Report.
- SJT 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 4.00, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SAN JUAN BASIN ROYALTY TR is currently very high, coming in at 100.00%. SJT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, SJT's net profit margin of 88.76% significantly outperformed against the industry.
- The revenue fell significantly faster than the industry average of 5.5%. Since the same quarter one year prior, revenues fell by 41.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 46.6% when compared to the same quarter one year ago, falling from $10.38 million to $5.54 million.
- You can view the full San Juan Basin Royalty Ratings Report.
- The gross profit margin for DYNEX CAPITAL INC is currently very high, coming in at 88.51%. Regardless of DX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DX's net profit margin of -14.64% significantly underperformed when compared to the industry average.
- The share price of DYNEX CAPITAL INC has not done very well: it is down 12.77% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 124.1% when compared to the same quarter one year ago, falling from $19.17 million to -$4.63 million.
- You can view the full Dynex Capital Ratings Report.
- Our dividend calendar.