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." Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 7.70%. Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 26.52. The average volume for Solar Senior Capital has been 33,800 shares per day over the past 30 days. Solar Senior Capital has a market cap of $210.9 million and is part of the financial services industry. Shares are up 1.3% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Solar Senior Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- SUNS's revenue growth has slightly outpaced the industry average of 8.8%. Since the same quarter one year prior, revenues slightly increased by 0.5%. 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 SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 73.06%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 52.98% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 263.69% to $13.70 million when compared to the same quarter last year. Despite an increase in cash flow, SOLAR SENIOR CAPITAL LTD's average is still marginally south of the industry average growth rate of 273.60%.
- 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, SOLAR SENIOR CAPITAL LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
- In its most recent trading session, SUNS 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, 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 Solar Senior Capital Ratings Report.
- Compared to other companies in the Real Estate Management & Development industry and the overall market, ALTO PALERMO SA's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The revenue growth greatly exceeded the industry average of 33.9%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 130.76% and other important driving factors, this stock has surged by 40.91% 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.
- Even though the current debt-to-equity ratio is 1.19, it is still below the industry average, suggesting that this level of debt is acceptable within the Real Estate Management & Development industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.10 is sturdy.
- Net operating cash flow has declined marginally to $45.56 million or 3.97% 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 Alto Palermo Ratings Report.
- This stock has managed to rise its share value by 67.03% over the past twelve months. Although BGCP had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- 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 5715.5% when compared to the same quarter one year prior, rising from -$0.45 million to $25.33 million.
- Net operating cash flow has significantly increased by 252.14% to $42.54 million when compared to the same quarter last year. Despite an increase in cash flow, BGC PARTNERS INC's cash flow growth rate is still lower than the industry average growth rate of 273.60%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.8%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for BGC PARTNERS INC is rather low; currently it is at 15.27%. Regardless of BGCP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BGCP's net profit margin of 5.84% is significantly lower than the industry average.
- You can view the full BGC Partners Ratings Report.
- The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 16.1%. 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.
- Net operating cash flow has increased to $160.47 million or 11.72% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.96%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- PENGROWTH ENERGY 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PENGROWTH ENERGY CORP reported lower earnings of $0.04 versus $0.26 in the prior year.
- 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 351.0% when compared to the same quarter one year ago, falling from -$23.79 million to -$107.30 million.
- You can view the full Pengrowth Energy Ratings Report.
- Our dividend calendar.