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." WhiteHorse Finance (NASDAQ: WHF) shares currently have a dividend yield of 10.20%. Whitehorse Finance, LLC is a fund of HIG Capital LLC. The company has a P/E ratio of 9.45. The average volume for WhiteHorse Finance has been 61,700 shares per day over the past 30 days. WhiteHorse Finance has a market cap of $208.0 million and is part of the financial services industry. Shares are down 6% year-to-date as of the close of trading on Monday. TheStreet Ratings rates WhiteHorse Finance as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 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 81.6% when compared to the same quarter one year prior, rising from $3.51 million to $6.37 million.
- Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, WHITEHORSE FINANCE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- WHF has underperformed the S&P 500 Index, declining 12.37% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has significantly decreased to -$36.94 million or 106.76% 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 WhiteHorse Finance Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 36.4% when compared to the same quarter one year prior, rising from $12.84 million to $17.52 million.
- RESOURCE CAPITAL CORP has improved earnings per share by 9.1% 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, RESOURCE CAPITAL CORP reported lower earnings of $0.33 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus $0.33).
- Net operating cash flow has decreased to $19.17 million or 17.72% when compared to the same quarter last year. Despite a decrease in cash flow RESOURCE CAPITAL CORP is still fairing well by exceeding its industry average cash flow growth rate of -58.18%.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Resource Capital Ratings Report.
- The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 17.0%. 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.
- MARTIN MIDSTREAM PARTNERS LP 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MARTIN MIDSTREAM PARTNERS LP swung to a loss, reporting -$0.49 versus $1.33 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus -$0.49).
- The share price of MARTIN MIDSTREAM PARTNERS LP has not done very well: it is down 13.82% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Net operating cash flow has significantly decreased to -$15.58 million or 321.70% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 110.7% when compared to the same quarter one year ago, falling from $9.08 million to -$0.97 million.
- You can view the full Martin Midstream Partners Ratings Report.
- Our dividend calendar.