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." WhiteHorse Finance (NASDAQ: WHF) shares currently have a dividend yield of 10.30%. Whitehorse Finance, LLC is a fund of HIG Capital LLC. The company has a P/E ratio of 11.05. The average volume for WhiteHorse Finance has been 40,700 shares per day over the past 30 days. WhiteHorse Finance has a market cap of $206.6 million and is part of the financial services industry. Shares are down 8% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates WhiteHorse Finance as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive. Highlights from the ratings report include:
- The gross profit margin for WHITEHORSE FINANCE INC is rather high; currently it is at 63.15%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, WHF's net profit margin of 73.53% significantly outperformed against the industry.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, WHF has underperformed the S&P 500 Index, declining 6.13% from its price level of one year ago.
- The revenue fell significantly faster than the industry average of 7.7%. Since the same quarter one year prior, revenues fell by 45.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 decreased by 20.6% when compared to the same quarter one year ago, dropping from $7.97 million to $6.34 million.
- You can view the full WhiteHorse Finance Ratings Report.
- CCG, with its decline in revenue, underperformed when compared the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 20.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CAMPUS CREST COMMUNITIES INC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAMPUS CREST COMMUNITIES INC swung to a loss, reporting -$0.02 versus $0.16 in the prior year. This year, the market expects an improvement in earnings ($0.10 versus -$0.02).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.53%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 500.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for CAMPUS CREST COMMUNITIES INC is currently extremely low, coming in at 3.00%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -33.46% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$18.00 million or 375.67% 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 Campus Crest Communities Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 25.6% when compared to the same quarter one year prior, rising from $8.37 million to $10.51 million.
- 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 Capital Markets industry and the overall market, GLADSTONE CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- GLAD, with its decline in revenue, slightly underperformed the industry average of 7.7%. Since the same quarter one year prior, revenues fell by 14.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has significantly decreased to -$1.20 million or 113.62% 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 Gladstone Capital Ratings Report.
- Our dividend calendar.