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 which could 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." TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 8.70%. TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 8.64. The average volume for TCP Capital has been 323,400 shares per day over the past 30 days. TCP Capital has a market cap of $597.7 million and is part of the financial services industry. Shares are down 1.6% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates TCP Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 16.6%. Since the same quarter one year prior, revenues rose by 42.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- TCP CAPITAL CORP has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.60 versus $1.20).
- When compared to other companies in the Capital Markets industry and the overall market, TCP CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- In its most recent trading session, TCPC 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- Net operating cash flow has significantly decreased to -$132.29 million or 481.14% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full TCP Capital Ratings Report.
- DSWL 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 4.14, which clearly demonstrates the ability to cover short-term cash needs.
- DSWL, with its decline in revenue, underperformed when compared the industry average of 2.7%. Since the same quarter one year prior, revenues fell by 22.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The share price of DESWELL INDUSTRIES INC has not done very well: it is down 12.40% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for DESWELL INDUSTRIES INC is rather low; currently it is at 18.76%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -13.25% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$0.22 million or 103.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Deswell Industries Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 47.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MARPS 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.
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- MARINE PETROLEUM TRUST reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MARINE PETROLEUM TRUST reported lower earnings of $1.36 versus $1.92 in the prior year.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MARINE PETROLEUM TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Marine Petroleum Ratings Report.
- Our dividend calendar.