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." Gladstone Investment Corporation (NASDAQ: GAIN) shares currently have a dividend yield of 9.30%. Gladstone Investment Corporation is a business development company specializing in buyout, recapitalization, and changes in control investments. The average volume for Gladstone Investment Corporation has been 205,400 shares per day over the past 30 days. Gladstone Investment Corporation has a market cap of $204.4 million and is part of the financial services industry. Shares are down 4% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Gladstone Investment Corporation as a buy. Highlights from the ratings report include:
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- GLADSTONE INVESTMENT CORP/DE 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 suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, GLADSTONE INVESTMENT CORP/DE swung to a loss, reporting -$0.06 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus -$0.06).
- GAIN, with its decline in revenue, underperformed when compared the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 15.9%. 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 significantly decreased by 94.1% when compared to the same quarter one year ago, falling from $15.95 million to $0.94 million.
- You can view the full Gladstone Investment Corporation Ratings Report.