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." Triangle Capital Corporation (NYSE: TCAP) shares currently have a dividend yield of 7.80%. Triangle Capital Corporation is a business development company specializing in private equity and mezzanine investments. The company has a P/E ratio of 13.78. The average volume for Triangle Capital Corporation has been 286,700 shares per day over the past 30 days. Triangle Capital Corporation has a market cap of $772.7 million and is part of the financial services industry. Shares are up 0.8% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Triangle Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins 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 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, TRIANGLE CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for TRIANGLE CAPITAL CORP is currently very high, coming in at 79.01%. Regardless of TCAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCAP's net profit margin of 52.00% significantly outperformed against the industry.
- 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 1.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, TCAP 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.
- TRIANGLE CAPITAL CORP's earnings per share declined by 32.8% 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, TRIANGLE CAPITAL CORP increased its bottom line by earning $2.94 versus $2.23 in the prior year. For the next year, the market is expecting a contraction of 27.2% in earnings ($2.14 versus $2.94).
- You can view the full Triangle Capital Corporation Ratings Report.