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." Gladstone Investment Corporation (NASDAQ: GAIN) shares currently have a dividend yield of 9.70%. Gladstone Investment Corporation is a business development company specializing in buyout, recapitalization, and changes in control investments. The average volume for Gladstone Investment Corporation has been 274,000 shares per day over the past 30 days. Gladstone Investment Corporation has a market cap of $195.9 million and is part of the financial services industry. Shares are down 8.2% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Gladstone Investment Corporation as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The gross profit margin for GLADSTONE INVESTMENT CORP/DE is currently very high, coming in at 70.65%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.63% trails the industry average.
- GAIN, with its decline in revenue, underperformed when compared the industry average of 5.1%. Since the same quarter one year prior, revenues fell by 15.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- GLADSTONE INVESTMENT CORP/DE 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GLADSTONE INVESTMENT CORP/DE swung to a loss, reporting -$0.06 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus -$0.06).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 94.1% when compared to the same quarter one year ago, falling from $15.95 million to $0.94 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market, GLADSTONE INVESTMENT CORP/DE's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Gladstone Investment Corporation Ratings Report.
- The revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 29.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 86.6% when compared to the same quarter one year prior, rising from -$46.58 million to -$6.25 million.
- EV ENERGY PARTNERS LP reported significant earnings per share improvement 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, EV ENERGY PARTNERS LP reported poor results of -$1.69 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus -$1.69).
- The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, EVEP's quick ratio is somewhat strong at 1.17, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has decreased to $32.63 million or 21.15% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full EV Energy Partners Ratings Report.
- Net operating cash flow has slightly increased to $49.90 million or 9.90% when compared to the same quarter last year. Despite an increase in cash flow, DYNEX CAPITAL INC's cash flow growth rate is still lower than the industry average growth rate of 29.86%.
- The gross profit margin for DYNEX CAPITAL INC is currently very high, coming in at 83.12%. Regardless of DX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DX's net profit margin of -3.00% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 103.7% when compared to the same quarter one year ago, falling from $19.60 million to -$0.73 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, DYNEX CAPITAL INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Dynex Capital Ratings Report.
- Our dividend calendar.