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." BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 10.90%. 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 11.60. The average volume for BlackRock Kelso Capital Corporation has been 483,200 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $707.6 million and is part of the financial services industry. Shares are down 5.5% 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 increase in net income, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 38.5% when compared to the same quarter one year prior, rising from $14.33 million to $19.84 million.
- BLACKROCK KELSO CAPITAL CORP has improved earnings per share by 36.8% 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, BLACKROCK KELSO CAPITAL CORP reported lower earnings of $0.78 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus $0.78).
- In its most recent trading session, BKCC 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. 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.
- Net operating cash flow has significantly decreased to -$110.23 million or 247.73% 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 BlackRock Kelso Capital Corporation Ratings Report.
- PFLT's very impressive revenue growth greatly exceeded the industry average of 8.6%. Since the same quarter one year prior, revenues leaped by 74.8%. 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 38.1% when compared to the same quarter one year prior, rising from $3.94 million to $5.45 million.
- 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. 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.
- PENNANTPARK FLOATING RT CAP's earnings per share declined by 13.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, PENNANTPARK FLOATING RT CAP reported lower earnings of $1.36 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 19.1% in earnings ($1.10 versus $1.36).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK FLOATING RT CAP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full PennantPark Floating Rate Capital Ratings Report.
- Compared to its closing price of one year ago, CEL's share price has jumped by 51.92%, exceeding the performance of the broader market during that same time frame. 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.
- CEL, with its decline in revenue, slightly underperformed the industry average of 0.8%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. Weakness in the company's revenue seems to have hurt the 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 Wireless Telecommunication Services industry. The net income has significantly decreased by 52.1% when compared to the same quarter one year ago, falling from $32.21 million to $15.44 million.
- Net operating cash flow has declined marginally to $133.81 million or 0.31% 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.
- You can view the full Cellcom Israel 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 101.25% significantly outperformed against the industry.
- MARPS, with its decline in revenue, slightly underperformed the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 8.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, MARPS has underperformed the S&P 500 Index, declining 12.71% 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.
- MARINE PETROLEUM TRUST's earnings per share declined by 7.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, MARINE PETROLEUM TRUST reported lower earnings of $1.36 versus $1.92 in the prior year.
- You can view the full Marine Petroleum Ratings Report.
- Our dividend calendar.