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 "Hold."NGP Capital Resources Company (NASDAQ: NGPC) shares currently have a dividend yield of 10.70%. NGP Capital Resources Company is a business development company specializing in investments in small and mid size and middle market companies. The company has a P/E ratio of 24.83. The average volume for NGP Capital Resources Company has been 85,300 shares per day over the past 30 days. NGP Capital Resources Company has a market cap of $122.2 million and is part of the financial services industry. Shares are down 20.4% year-to-date as of the close of trading on Friday. TheStreet Ratings rates NGP Capital Resources Company as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity. Highlights from the ratings report include:
- NGPC's revenue growth has slightly outpaced the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income increased by 16.1% when compared to the same quarter one year prior, going from -$7.61 million to -$6.38 million.
- NGP CAPITAL RESOURCES CO has improved earnings per share by 13.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NGP CAPITAL RESOURCES CO reported lower earnings of $0.19 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus $0.19).
- NGPC has underperformed the S&P 500 Index, declining 6.44% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, NGP CAPITAL RESOURCES CO underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full NGP Capital Resources Company Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 34.2%. Since the same quarter one year prior, revenues rose by 32.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FERRELLGAS PARTNERS -LP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FERRELLGAS PARTNERS -LP turned its bottom line around by earning $0.68 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($1.31 versus $0.68).
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.98% over the past year, a rise that has exceeded that of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The gross profit margin for FERRELLGAS PARTNERS -LP is rather low; currently it is at 17.38%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.95% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$35.75 million or 191.42% 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 Ferrellgas Partners Ratings Report.
- The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 10.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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.
- The gross profit margin for GLADSTONE CAPITAL CORP is rather high; currently it is at 65.96%. Regardless of GLAD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GLAD's net profit margin of -22.52% significantly underperformed when compared to the industry average.
- Net operating cash flow has significantly decreased to -$10.72 million or 1241.10% 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.