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."Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 8.30%. Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 14.27. The average volume for Solar Senior Capital has been 86,500 shares per day over the past 30 days. Solar Senior Capital has a market cap of $195.8 million and is part of the financial services industry. Shares are down 6.8% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Solar Senior Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 28.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 74.79%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 69.52% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 180.47% to $13.82 million when compared to the same quarter last year. In addition, SOLAR SENIOR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of 15.20%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 37.3% when compared to the same quarter one year prior, rising from $2.90 million to $3.99 million.
- SOLAR SENIOR CAPITAL LTD has improved earnings per share by 34.6% 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, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.11 versus $1.46 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $1.11).
- You can view the full Solar Senior Capital Ratings Report.
- TNH 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. Along with this, the company maintains a quick ratio of 3.87, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for TERRA NITROGEN CO -LP is rather high; currently it is at 64.77%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TNH's net profit margin of 57.90% significantly outperformed against the industry.
- TNH, with its decline in revenue, underperformed when compared the industry average of 7.2%. Since the same quarter one year prior, revenues fell by 20.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Chemicals industry and the overall market, TERRA NITROGEN CO -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.25%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 34.53% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- You can view the full Terra Nitrogen Ratings Report.
- SJT's very impressive revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues leaped by 295.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SJT 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. Along with this, the company maintains a quick ratio of 2.84, which clearly demonstrates the ability to cover short-term cash needs.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, SAN JUAN BASIN ROYALTY TR's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- 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 314.9% when compared to the same quarter one year prior, rising from $3.40 million to $14.09 million.
- You can view the full San Juan Basin Royalty Ratings Report.
- Our dividend calendar.