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." Pennant Park Investment Corporation (NASDAQ: PNNT) shares currently have a dividend yield of 9.80%. PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 6.54. The average volume for Pennant Park Investment Corporation has been 746,000 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $762.2 million and is part of the financial services industry. Shares are down 1.3% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Pennant Park Investment Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, compelling growth in net income and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 22.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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, PENNANTPARK INVESTMENT CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 66.36%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 107.39% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income increased by 50.8% when compared to the same quarter one year prior, rising from $26.97 million to $40.68 million.
- PENNANTPARK INVESTMENT CORP has improved earnings per share by 48.8% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, PENNANTPARK INVESTMENT CORP increased its bottom line by earning $1.39 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 18.0% in earnings ($1.14 versus $1.39).
- You can view the full Pennant Park Investment Corporation 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 15.21%.
- 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. 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 TICC Capital Ratings Report.
- FGP's revenue growth trails the industry average of 36.0%. Since the same quarter one year prior, revenues rose by 19.8%. 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 increased to $174.04 million or 40.00% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.91%.
- FERRELLGAS PARTNERS -LP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, FERRELLGAS PARTNERS -LP turned its bottom line around by earning $0.68 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.68).
- 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, on the basis of net income growth from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Gas Utilities industry. The net income increased by 1.6% when compared to the same quarter one year prior, going from $44.68 million to $45.39 million.
- You can view the full Ferrellgas Partners Ratings Report.
- Our dividend calendar.