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 "Buy." Pennant Park Investment Corporation (NASDAQ: PNNT) shares currently have a dividend yield of 10.00%. PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 7.14. The average volume for Pennant Park Investment Corporation has been 454,400 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $745.6 million and is part of the financial services industry. Shares are down 3.5% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Pennant Park Investment Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, compelling growth in net income and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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 Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 65.38%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 114.56% 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 Capital Markets industry. The net income increased by 38.2% when compared to the same quarter one year prior, rising from $28.54 million to $39.46 million.
- PENNANTPARK INVESTMENT CORP has improved earnings per share by 34.1% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PENNANTPARK INVESTMENT CORP increased its bottom line by earning $1.39 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 20.1% in earnings ($1.11 versus $1.39).
- You can view the full Pennant Park Investment Corporation Ratings Report.
- SJT's very impressive revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues leaped by 248.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SJT 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 3.36, 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, SAN JUAN BASIN ROYALTY TR's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- 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 265.3% when compared to the same quarter one year prior, rising from $3.86 million to $14.10 million.
- You can view the full San Juan Basin Royalty Ratings Report.
- EXLP's revenue growth has slightly outpaced the industry average of 8.2%. Since the same quarter one year prior, revenues rose by 16.2%. 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.
- 41.18% is the gross profit margin for EXTERRAN PARTNERS LP which we consider to be strong. Regardless of EXLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.55% trails the industry average.
- 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 the other companies in the Energy Equipment & Services industry and the overall market, EXTERRAN PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- 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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- EXTERRAN PARTNERS LP's earnings per share declined by 38.7% in the most recent quarter compared to 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, EXTERRAN PARTNERS LP increased its bottom line by earning $1.18 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 26.3% in earnings ($0.87 versus $1.18).
- You can view the full Exterran Partners L.P Ratings Report.
- Our dividend calendar.