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." Medley Capital (NYSE: MCC) shares currently have a dividend yield of 11.70%. Medley Capital Corporation is a business development company. The fund seeks to invest in privately negotiated debt and equity securities of small and middle market companies. The company has a P/E ratio of 10.99. The average volume for Medley Capital has been 703,200 shares per day over the past 30 days. Medley Capital has a market cap of $660.9 million and is part of the financial services industry. Shares are down 9% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Medley Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- MCC's very impressive revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues leaped by 55.4%. 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 MEDLEY CAPITAL CORP is rather high; currently it is at 67.42%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.62% significantly outperformed against the industry average.
- MEDLEY CAPITAL CORP's earnings per share declined by 30.0% 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, MEDLEY CAPITAL CORP increased its bottom line by earning $1.32 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $1.32).
- Net operating cash flow has significantly decreased to -$128.59 million or 332.01% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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, MEDLEY CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Medley Capital Ratings Report.
- KOSS 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- 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 gross profit margin for KOSS CORP is currently lower than what is desirable, coming in at 28.81%. 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.
- Net operating cash flow has significantly decreased to $0.34 million or 78.74% 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 Koss Ratings Report.
- Net operating cash flow has significantly increased by 247.67% to $5.83 million when compared to the same quarter last year. In addition, UMH PROPERTIES INC has also vastly surpassed the industry average cash flow growth rate of 30.28%.
- UMH, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, UMH 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, UMH PROPERTIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for UMH PROPERTIES INC is rather low; currently it is at 16.19%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 3.15% significantly trails the industry average.
- You can view the full UMH Properties Ratings Report.
- Our dividend calendar.