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 "Hold." Educational Development Corporation (NASDAQ: EDUC) shares currently have a dividend yield of 8.60%. Educational Development Corporation operates as a trade publisher of the line of children's books in the United States. The company has a P/E ratio of 33.73. The average volume for Educational Development Corporation has been 7,400 shares per day over the past 30 days. Educational Development Corporation has a market cap of $14.7 million and is part of the media industry. Shares are up 20.9% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Educational Development Corporation 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 and disappointing return on equity. Highlights from the ratings report include:
- EDUC's revenue growth has slightly outpaced the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 8.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 61.24%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.44% is above that of the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Distributors industry average, but is less than that of the S&P 500. The net income increased by 4.2% when compared to the same quarter one year prior, going from $0.53 million to $0.55 million.
- EDUC has underperformed the S&P 500 Index, declining 8.32% from its price level of one year ago. 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.
- 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 Distributors industry and the overall market, EDUCATIONAL DEVELOPMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Educational Development Corporation Ratings Report.
- Net operating cash flow has significantly increased by 1117.59% to $18.28 million when compared to the same quarter last year. In addition, FULL CIRCLE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -113.53%.
- FULL CIRCLE 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, FULL CIRCLE CAPITAL CORP increased its bottom line by earning $0.52 versus $0.44 in the prior year. This year, the market expects an improvement in earnings ($0.73 versus $0.52).
- FULL, with its decline in revenue, slightly underperformed the industry average of 17.1%. Since the same quarter one year prior, revenues fell by 27.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, FULL CIRCLE CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 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 185.0% when compared to the same quarter one year ago, falling from -$0.43 million to -$1.22 million.
- You can view the full Full Circle Capital Ratings Report.
- MCEP's very impressive revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues leaped by 59.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- MID-CON ENERGY PARTNERS -LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MID-CON ENERGY PARTNERS -LP increased its bottom line by earning $1.63 versus $0.51 in the prior year. For the next year, the market is expecting a contraction of 6.4% in earnings ($1.53 versus $1.63).
- Currently the debt-to-equity ratio of 1.68 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, MCEP's quick ratio is somewhat strong at 1.32, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has declined marginally to $12.90 million or 3.72% when compared to the same quarter last year. Despite a decrease in cash flow MID-CON ENERGY PARTNERS -LP is still fairing well by exceeding its industry average cash flow growth rate of -50.31%.
- You can view the full Mid-Con Energy Partners Ratings Report.
- Our dividend calendar.