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 "Buy." TICC Capital (NASDAQ: TICC) shares currently have a dividend yield of 11.30%. TICC Capital Corp., a business development company, operates as a closed-end, non-diversified management investment company. The firm invests in both public and private companies. The company has a P/E ratio of 5.95. The average volume for TICC Capital has been 366,200 shares per day over the past 30 days. TICC Capital has a market cap of $546.1 million and is part of the financial services industry. Shares are up 1.3% year-to-date as of the close of trading on Monday. TheStreet Ratings rates TICC Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- TICC's very impressive revenue growth greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues leaped by 76.0%. 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 TICC CAPITAL CORP is rather high; currently it is at 62.72%. It has increased significantly from the same period last year. Along with this, the net profit margin of 85.93% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to -$34.57 million or 9.09% when compared to the same quarter last year. Despite an increase in cash flow of 9.09%, TICC CAPITAL CORP is still growing at a significantly lower rate than the industry average of 269.25%.
- In its most recent trading session, TICC 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.
- TICC CAPITAL CORP's earnings per share declined by 41.4% in the most recent quarter compared to 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, TICC CAPITAL CORP increased its bottom line by earning $1.77 versus $0.44 in the prior year. For the next year, the market is expecting a contraction of 40.7% in earnings ($1.05 versus $1.77).
- You can view the full TICC Capital Ratings Report.