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." TICC Capital (NASDAQ: TICC) shares currently have a dividend yield of 12.00%. TICC Capital Corp., a business development company, operates as a closed-end, non-diversified management investment company. The firm invests in both public and private companies. The company has a P/E ratio of 9.31. The average volume for TICC Capital has been 600,100 shares per day over the past 30 days. TICC Capital has a market cap of $514.2 million and is part of the financial services industry. Shares are down 6.6% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates TICC Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in stock price during the past year. 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 greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 49.6%. 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 TICC CAPITAL CORP is currently very high, coming in at 71.92%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 42.82% significantly outperformed against the industry average.
- TICC CAPITAL CORP's earnings per share declined by 22.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TICC CAPITAL CORP reported lower earnings of $1.11 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($1.17 versus $1.11).
- In its most recent trading session, TICC 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. 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 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 Capital Markets industry. The net income has decreased by 7.5% when compared to the same quarter one year ago, dropping from $14.12 million to $13.06 million.
- You can view the full TICC Capital Ratings Report.