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."Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 7.70%. Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 17.51. The average volume for Solar Capital has been 298,900 shares per day over the past 30 days. Solar Capital has a market cap of $888.7 million and is part of the financial services industry. Shares are down 7.6% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Solar Capital as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 1018.68% to $99.04 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of 11.10%.
- The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 64.41%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of 42.13% significantly outperformed against the industry.
- SLRC, with its decline in revenue, underperformed when compared the industry average of 5.1%. Since the same quarter one year prior, revenues fell by 29.2%. 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 61.6% when compared to the same quarter one year ago, falling from $35.81 million to $13.75 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. When compared to other companies in the Capital Markets industry and the overall market, SOLAR CAPITAL LTD's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Solar Capital Ratings Report.
- 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.
- Net operating cash flow has significantly increased by 111.78% to $3.12 million when compared to the same quarter last year. In addition, NGP CAPITAL RESOURCES CO has also vastly surpassed the industry average cash flow growth rate of 11.10%.
- 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 ($0.42 versus $0.19).
- In its most recent trading session, NGPC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- KOSS CORP 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, KOSS CORP increased its bottom line by earning $0.74 versus $0.40 in the prior year.
- The revenue fell significantly faster than the industry average of 17.3%. Since the same quarter one year prior, revenues fell by 48.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for KOSS CORP is currently lower than what is desirable, coming in at 25.42%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -0.58% trails that of the industry average.
- 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 Household Durables industry. The net income has significantly decreased by 121.7% when compared to the same quarter one year ago, falling from $0.12 million to -$0.03 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.33%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full Koss Ratings Report.
- Our dividend calendar.