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 8.30%. Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 10.16. The average volume for Capital Product Partners has been 194,200 shares per day over the past 30 days. Capital Product Partners has a market cap of $988.8 million and is part of the transportation industry. Shares are up 6.9% year-to-date as of the close of trading on Thursday. 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 increase in stock price during the past year. 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 3.2%. 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 17.51%.
- 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.
- 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 1.57%.
- 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.
- The revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 31.9%. 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 TICC CAPITAL CORP is currently very high, coming in at 79.09%. It has increased significantly from the same period last year. Along with this, the net profit margin of 46.27% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 113.22% to $18.56 million when compared to the same quarter last year. In addition, TICC CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 12.42%.
- TICC CAPITAL CORP's earnings per share declined by 43.9% in the most recent quarter compared to 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, TICC CAPITAL CORP reported lower earnings of $1.11 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $1.11).
- In its most recent trading session, TICC 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 TICC Capital Ratings Report.
- Our dividend calendar.