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." Mesa Royalty (NYSE: MTR) shares currently have a dividend yield of 9.80%. Mesa Royalty Trust holds net overriding royalty interests in various oil and gas properties in the United States. It has interests in properties located in the Hugoton field of Kansas; the San Juan Basin field of New Mexico and Colorado; and the Yellow Creek field of Wyoming. The company has a P/E ratio of 13.63. The average volume for Mesa Royalty has been 16,400 shares per day over the past 30 days. Mesa Royalty has a market cap of $50.0 million and is part of the financial services industry. Shares are up 24.3% 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 Mesa Royalty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and increase in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.1%. Since the same quarter one year prior, revenues rose by 19.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MTR 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 4.79, 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, MESA ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 21.8% when compared to the same quarter one year prior, going from $0.99 million to $1.20 million.
- You can view the full Mesa Royalty Ratings Report.
- LOAN's revenue growth has slightly outpaced the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 14.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 51.77% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LOAN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- MANHATTAN BRIDGE CAPITAL INC has improved earnings per share by 25.0% 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. During the past fiscal year, MANHATTAN BRIDGE CAPITAL INC increased its bottom line by earning $0.15 versus $0.10 in the prior year.
- The gross profit margin for MANHATTAN BRIDGE CAPITAL INC is currently very high, coming in at 71.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 34.15% significantly outperformed against the industry average.
- You can view the full Manhattan Bridge Capital Ratings Report.
- The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 25.7%. 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.
- The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 70.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 55.77% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 15.0% when compared to the same quarter one year prior, going from $12.25 million to $14.09 million.
- 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. When compared to other companies in the Capital Markets industry and the overall market, GOLUB CAPITAL BDC INC's return on equity is below that of both the industry average and the S&P 500.
- GOLUB CAPITAL BDC INC's earnings per share declined by 15.8% 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, GOLUB CAPITAL BDC INC increased its bottom line by earning $1.36 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 8.8% in earnings ($1.24 versus $1.36).
- You can view the full Golub Capital BDC Ratings Report.
- Our dividend calendar.