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."Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 7.10%. Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company is engaged in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. The company has a P/E ratio of 11.96. The average volume for Medallion Financial has been 195,000 shares per day over the past 30 days. Medallion Financial has a market cap of $339.2 million and is part of the financial services industry. Shares are down 6.8% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Medallion Financial as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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.
- The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 58.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 73.33% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income increased by 4.5% when compared to the same quarter one year prior, going from $6.47 million to $6.77 million.
- 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, MEDALLION FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TAXI has underperformed the S&P 500 Index, declining 6.00% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Medallion Financial Ratings Report.
- 42.84% is the gross profit margin for CVR PARTNERS LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, UAN's net profit margin of 26.77% significantly outperformed against the industry.
- UAN, with its decline in revenue, underperformed when compared the industry average of 11.3%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Chemicals industry and the overall market, CVR PARTNERS LP's return on equity exceeds that of both the industry average and the S&P 500.
- CVR PARTNERS LP's earnings per share declined by 40.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CVR PARTNERS LP increased its bottom line by earning $1.62 versus $1.53 in the prior year. For the next year, the market is expecting a contraction of 9.6% in earnings ($1.47 versus $1.62).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.08%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 40.81% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full CVR Partners Ratings Report.
- NRT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, NORTH EUROPEAN OIL RTY TR's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for NORTH EUROPEAN OIL RTY TR is currently very high, coming in at 100.00%. NRT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, NRT's net profit margin of 93.63% significantly outperformed against the industry.
- NRT, with its decline in revenue, slightly underperformed the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 8.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 9.4% when compared to the same quarter one year ago, dropping from $5.47 million to $4.96 million.
- You can view the full North European Oil Royalty Ratings Report.
- Our dividend calendar.