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 26.39. The average volume for Solar Senior Capital has been 35,400 shares per day over the past 30 days. Solar Senior Capital has a market cap of $209.9 million and is part of the financial services industry. Shares are up 0.2% 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:
- The revenue growth came in higher than the industry average of 14.8%. 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.
- 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.
- Net operating cash flow has slightly increased to $65.87 million or 6.46% when compared to the same quarter last year. In addition, NATURAL RESOURCE PARTNERS LP has also modestly surpassed the industry average cash flow growth rate of 2.58%.
- The gross profit margin for NATURAL RESOURCE PARTNERS LP is currently very high, coming in at 92.73%. Regardless of NRP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NRP's net profit margin of 48.16% significantly outperformed against the industry.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, NATURAL RESOURCE PARTNERS LP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.85%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 33.33% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 30.5% when compared to the same quarter one year ago, falling from $52.00 million to $36.13 million.
- You can view the full Natural Resources Partners L.P Ratings Report.
- Compared to its closing price of one year ago, CEL's share price has jumped by 65.82%, 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, underperformed when compared the industry average of 7.1%. 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.
- EFC's very impressive revenue growth greatly exceeded the industry average of 14.8%. Since the same quarter one year prior, revenues leaped by 56.0%. 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.
- Net operating cash flow has significantly decreased to -$52.04 million or 130.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Capital Markets industry. The net income has significantly decreased by 60.3% when compared to the same quarter one year ago, falling from $29.54 million to $11.73 million.
- You can view the full Ellington Financial Ratings Report.
- Our dividend calendar.