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.