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." Fidus Investment (NASDAQ: FDUS) shares currently have a dividend yield of 7.10%. Fidus Investment Corporation operates as an externally managed, closed-end, and non-diversified management investment company. The company provides customized debt and equity financing solutions to lower middle-market companies in the United States. The company has a P/E ratio of 12.31. The average volume for Fidus Investment has been 56,400 shares per day over the past 30 days. Fidus Investment has a market cap of $292.5 million and is part of the financial services industry. Shares are up 29.5% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Fidus Investment as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, solid stock price performance 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:
- The revenue growth came in higher than the industry average of 8.7%. Since the same quarter one year prior, revenues rose by 14.3%. 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.
- Compared to its closing price of one year ago, FDUS's share price has jumped by 33.98%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, FDUS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The gross profit margin for FIDUS INVESTMENT CORP is rather high; currently it is at 68.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 44.20% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 367.12% to $35.26 million when compared to the same quarter last year. In addition, FIDUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 272.03%.
- 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 Capital Markets industry and the overall market on the basis of return on equity, FIDUS INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Fidus Investment Ratings Report.
- GNI 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. To add to this, GNI has a quick ratio of 2.40, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for GREAT NORTHERN IRON ORE PPTY is currently very high, coming in at 76.68%. Regardless of GNI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GNI's net profit margin of 76.68% significantly outperformed against the industry.
- GNI, with its decline in revenue, underperformed when compared the industry average of 3.8%. Since the same quarter one year prior, revenues fell by 15.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Metals & Mining industry and the overall market, GREAT NORTHERN IRON ORE PPTY's return on equity significantly exceeds that of both the industry average and the S&P 500.
- In its most recent trading session, GNI 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Great Northern Iron Ore Ratings Report.
- MCC's very impressive revenue growth greatly exceeded the industry average of 8.7%. Since the same quarter one year prior, revenues leaped by 92.5%. 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 MEDLEY CAPITAL CORP is rather high; currently it is at 68.08%. 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 13.38% trails the industry average.
- MEDLEY CAPITAL CORP 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MEDLEY CAPITAL CORP increased its bottom line by earning $1.24 versus $0.55 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $1.24).
- In its most recent trading session, MCC 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, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- Net operating cash flow has significantly decreased to -$110.26 million or 115.95% 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 Medley Capital Ratings Report.
- Our dividend calendar.