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 10.50%. 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 47,300 shares per day over the past 30 days. WhiteHorse Finance has a market cap of $202.1 million and is part of the financial services industry. Shares are down 10.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates WhiteHorse Finance as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, 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:
- Net operating cash flow has improved to $10.97 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
- 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 11.97% from its price level of one year ago.
- The revenue fell significantly faster than the industry average of 7.3%. 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.
- CONSOLIDATED COMM HLDGS INC has improved earnings per share by 14.3% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CONSOLIDATED COMM HLDGS INC increased its bottom line by earning $0.74 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.74).
- 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 Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 62.37%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CNSL's net profit margin of 2.12% is significantly lower than the industry average.
- Net operating cash flow has decreased to $43.72 million or 14.81% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The debt-to-equity ratio is very high at 8.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CNSL has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full Consolidated Communications Ratings Report.
- The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues slightly increased by 4.1%. 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.
- EVEP's debt-to-equity ratio of 0.91 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.02 is sturdy.
- EV ENERGY PARTNERS LP 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, EV ENERGY PARTNERS LP reported poor results of -$1.69 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($1.45 versus -$1.69).
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 408.0% when compared to the same quarter one year ago, falling from -$9.88 million to -$50.19 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EV ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full EV Energy Partners Ratings Report.
- Our dividend calendar.