Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."Capital Product Partners (NASDAQ: CPLP) shares currently have a dividend yield of 8.60%. Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 9.85. The average volume for Capital Product Partners has been 232,900 shares per day over the past 30 days. Capital Product Partners has a market cap of $957.8 million and is part of the transportation industry. Shares are up 3.4% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Capital Product Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. 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 came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 18.7%. 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.
- Compared to its closing price of one year ago, CPLP's share price has jumped by 26.51%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CPLP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The gross profit margin for CAPITAL PRODUCT PARTNERS LP is rather high; currently it is at 66.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.69% significantly outperformed against the industry average.
- Net operating cash flow has increased to $26.80 million or 49.84% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 16.30%.
- CPLP's debt-to-equity ratio of 0.76 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. Despite the fact that CPLP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.01 is high and demonstrates strong liquidity.
- You can view the full Capital Product Partners Ratings Report.
- The revenue growth came in higher than the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 28.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WHITESTONE REIT reported significant earnings per share improvement 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. We feel that this trend should continue. During the past fiscal year, WHITESTONE REIT increased its bottom line by earning $0.21 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($0.23 versus $0.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 149.9% when compared to the same quarter one year prior, rising from $0.95 million to $2.37 million.
- Net operating cash flow has significantly increased by 52.07% to $5.98 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.68%.
- You can view the full Whitestone REIT Ratings Report.
- PNNT's revenue growth has slightly outpaced the industry average of 5.1%. 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 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 exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. 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.
- 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 on the basis of return on equity, PENNANTPARK INVESTMENT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 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 19.1% in earnings ($1.13 versus $1.39).
- You can view the full Pennant Park Investment Corporation Ratings Report.
- Our dividend calendar.