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."Consolidated Communications (NASDAQ: CNSL) shares currently have a dividend yield of 7.70%. Consolidated Communications Holdings, Inc., together with its subsidiaries, provides a range of communications services to residential and business clients in Illinois, Texas, Pennsylvania, California, Kansas, and Missouri. The company has a P/E ratio of 26.49. The average volume for Consolidated Communications has been 220,000 shares per day over the past 30 days. Consolidated Communications has a market cap of $811.0 million and is part of the telecommunications industry. Shares are up 1.3% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Consolidated Communications as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, good cash flow from operations, notable return on equity, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- CONSOLIDATED COMM HLDGS INC has improved earnings per share by 17.6% 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 year. We feel that this trend should continue. During the past fiscal year, CONSOLIDATED COMM HLDGS INC increased its bottom line by earning $0.74 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.89 versus $0.74).
- Net operating cash flow has increased to $48.39 million or 33.71% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.40%.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- 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 Diversified Telecommunication Services industry and the overall market on the basis of return on equity, CONSOLIDATED COMM HLDGS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 63.05%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.56% trails the industry average.
- You can view the full Consolidated Communications Ratings Report.
- FULL's very impressive revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues leaped by 71.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- FULL CIRCLE CAPITAL CORP 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, FULL CIRCLE CAPITAL CORP increased its bottom line by earning $0.52 versus $0.44 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus $0.52).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 128.3% when compared to the same quarter one year prior, rising from $1.48 million to $3.38 million.
- The gross profit margin for FULL CIRCLE CAPITAL CORP is currently very high, coming in at 77.69%. It has increased significantly from the same period last year. Along with this, the net profit margin of 65.43% significantly outperformed against the industry average.
- Net operating cash flow has increased to -$3.54 million or 15.92% when compared to the same quarter last year. In addition, FULL CIRCLE CAPITAL CORP has also modestly surpassed the industry average cash flow growth rate of 9.84%.
- You can view the full Full Circle Capital Ratings Report.
- The revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 25.7%. 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.
- The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 70.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 55.77% 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 15.0% when compared to the same quarter one year prior, going from $12.25 million to $14.09 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. When compared to other companies in the Capital Markets industry and the overall market, GOLUB CAPITAL BDC INC's return on equity is below that of both the industry average and the S&P 500.
- GOLUB CAPITAL BDC INC's earnings per share declined by 15.8% 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, GOLUB CAPITAL BDC INC increased its bottom line by earning $1.36 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 8.8% in earnings ($1.24 versus $1.36).
- You can view the full Golub Capital BDC Ratings Report.
- Our dividend calendar.