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." BlackRock Kelso Capital Corporation (NASDAQ: BKCC) shares currently have a dividend yield of 9.40%. BlackRock Kelso Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm invests in all industries. The company has a P/E ratio of 6.74. The average volume for BlackRock Kelso Capital Corporation has been 816,200 shares per day over the past 30 days. BlackRock Kelso Capital Corporation has a market cap of $668.8 million and is part of the financial services industry. Shares are down 3.6% year-to-date as of the close of trading on Tuesday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreet Ratings rates BlackRock Kelso Capital Corporation as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations, expanding profit margins, notable return on equity and impressive record of earnings per share growth. 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 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 156.7% when compared to the same quarter one year prior, rising from $12.02 million to $30.87 million.
- Net operating cash flow has significantly increased by 273.87% to $193.65 million when compared to the same quarter last year. In addition, BLACKROCK KELSO CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -96.17%.
- The gross profit margin for BLACKROCK KELSO CAPITAL CORP is rather high; currently it is at 66.84%. Regardless of BKCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BKCC's net profit margin of 91.42% significantly outperformed against the industry.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, BLACKROCK KELSO CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- BLACKROCK KELSO CAPITAL CORP reported significant earnings per share improvement 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, BLACKROCK KELSO CAPITAL CORP increased its bottom line by earning $1.20 versus $0.78 in the prior year. For the next year, the market is expecting a contraction of 31.9% in earnings ($0.82 versus $1.20).
- You can view the full BlackRock Kelso Capital Corporation Ratings Report.