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."Capital Product Partners (NASDAQ: CPLP) shares currently have a dividend yield of 8.60%. Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 9.83. The average volume for Capital Product Partners has been 186,700 shares per day over the past 30 days. Capital Product Partners has a market cap of $956.0 million and is part of the transportation industry. Shares are up 4% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Capital Product Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 18.7%. 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 CAPITAL PRODUCT PARTNERS LP is rather high; currently it is at 66.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.69% significantly outperformed against the industry average.
- Net operating cash flow has increased to $26.80 million or 49.84% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.38%.
- CPLP's debt-to-equity ratio of 0.76 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CPLP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.01 is high and demonstrates strong liquidity.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- You can view the full Capital Product Partners Ratings Report.
- The gross profit margin for GLADSTONE INVESTMENT CORP/DE is currently very high, coming in at 70.65%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.63% trails the industry average.
- 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.
- In its most recent trading session, GAIN 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. 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.
- Net operating cash flow has significantly decreased to -$22.26 million or 262.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Gladstone Investment Corporation Ratings Report.
- GSJK's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GSJK has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- 46.05% is the gross profit margin for COMPRESSCO PARTNERS LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.49% is above that of the industry average.
- Net operating cash flow has significantly increased by 140.00% to $16.23 million when compared to the same quarter last year. In addition, COMPRESSCO PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of 49.49%.
- COMPRESSCO PARTNERS LP reported flat earnings per share in the most recent quarter. 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, COMPRESSCO PARTNERS LP increased its bottom line by earning $1.11 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.41 versus $1.11).
- Compared to its closing price of one year ago, GSJK's share price has jumped by 26.51%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
- You can view the full Compressco Partners Ratings Report.
- Our dividend calendar.