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." Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 7.30%. Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 13.02. The average volume for Solar Capital has been 213,100 shares per day over the past 30 days. Solar Capital has a market cap of $967.3 million and is part of the financial services industry. Shares are down 2.4% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Solar Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins and good cash flow from operations. 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 16.7%. Since the same quarter one year prior, revenues slightly increased by 5.8%. 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 CAPITAL LTD is rather high; currently it is at 66.03%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.58% is above that of the industry average.
- Net operating cash flow has significantly increased by 728.42% to $260.79 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -6.95%.
- SOLAR CAPITAL LTD 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SOLAR CAPITAL LTD increased its bottom line by earning $3.12 versus $1.69 in the prior year. For the next year, the market is expecting a contraction of 45.8% in earnings ($1.69 versus $3.12).
- You can view the full Solar Capital Ratings Report.
- DOM's very impressive revenue growth greatly exceeded the industry average of 3.8%. Since the same quarter one year prior, revenues leaped by 83.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DOM 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. Along with this, the company maintains a quick ratio of 65.35, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DOMINION RES BLACK WARRIOR's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Powered by its strong earnings growth of 110.00% and other important driving factors, this stock has surged by 39.48% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DOM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 108.8% when compared to the same quarter one year prior, rising from $0.78 million to $1.62 million.
- You can view the full Dominion Resources Black Warrior Ratings Report.
- MCEP's very impressive revenue growth greatly exceeded the industry average of 3.8%. 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.
- The gross profit margin for MID-CON ENERGY PARTNERS -LP is rather high; currently it is at 64.33%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 26.29% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 474.4% when compared to the same quarter one year prior, rising from -$1.14 million to $4.26 million.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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 Mid-Con Energy Partners Ratings Report.
- Our dividend calendar.