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."BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 9.50%. BlackRock Kelso Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm invests in all industries. The company has a P/E ratio of 8.12. The average volume for BlackRock Kelso Capital Corporation has been 722,900 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $660.7 million and is part of the financial services industry. Shares are down 5.1% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates BlackRock Kelso Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations and notable return on equity. 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 gross profit margin for BLACKROCK KELSO CAPITAL CORP is rather high; currently it is at 59.66%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 77.50% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $52.83 million or 6.49% when compared to the same quarter last year. Despite an increase in cash flow, BLACKROCK KELSO CAPITAL CORP's average is still marginally south of the industry average growth rate of 12.73%.
- 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, BLACKROCK KELSO CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.2%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- BLACKROCK KELSO CAPITAL CORP's earnings per share declined by 25.6% 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, BLACKROCK KELSO CAPITAL CORP increased its bottom line by earning $1.20 versus $0.78 in the prior year. For the next year, the market is expecting a contraction of 31.1% in earnings ($0.83 versus $1.20).
- You can view the full BlackRock Kelso Capital Corporation Ratings Report.
- MARPS 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.
- 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, MARINE PETROLEUM TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for MARINE PETROLEUM TRUST is currently very high, coming in at 100.00%. MARPS has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MARPS's net profit margin of 93.47% significantly outperformed against the industry.
- MARPS, with its decline in revenue, underperformed when compared the industry average of 3.1%. Since the same quarter one year prior, revenues fell by 31.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, MARPS 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, 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 Marine Petroleum Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 38.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CRT 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 this, the company maintains a quick ratio of 8.40, which clearly demonstrates the ability to cover short-term cash needs.
- 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, CROSS TIMBERS ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Powered by its strong earnings growth of 59.09% and other important driving factors, this stock has surged by 36.17% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CRT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 58.1% when compared to the same quarter one year prior, rising from $2.66 million to $4.20 million.
- You can view the full Cross Timbers Royalty Ratings Report.
- Our dividend calendar.