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." Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 8.10%. Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 12.36. The average volume for Solar Capital has been 411,800 shares per day over the past 30 days. Solar Capital has a market cap of $839.5 million and is part of the financial services industry. Shares are down 12.3% 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 Solar Capital as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 1018.68% to $99.04 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -96.17%.
- The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 64.41%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of 42.13% significantly outperformed against the industry.
- SLRC, with its decline in revenue, underperformed when compared the industry average of 2.6%. Since the same quarter one year prior, revenues fell by 29.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 61.6% when compared to the same quarter one year ago, falling from $35.81 million to $13.75 million.
- 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 Capital Markets industry and the overall market, SOLAR CAPITAL LTD's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Solar Capital Ratings Report.
- The revenue growth came in higher than the industry average of 2.1%. Since the same quarter one year prior, revenues rose by 27.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- SHIP FINANCE INTL LTD has improved earnings per share by 5.3% 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, SHIP FINANCE INTL LTD reported lower earnings of $1.01 versus $2.26 in the prior year. This year, the market expects an improvement in earnings ($1.35 versus $1.01).
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SHIP FINANCE INTL LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has decreased to $37.06 million or 45.49% 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 Ship Finance International Ratings Report.
- CCG, with its decline in revenue, underperformed when compared the industry average of 10.5%. Since the same quarter one year prior, revenues fell by 10.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.97%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 225.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- CAMPUS CREST COMMUNITIES INC 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CAMPUS CREST COMMUNITIES INC swung to a loss, reporting -$0.03 versus $0.16 in the prior year. For the next year, the market is expecting a contraction of 533.3% in earnings (-$0.19 versus -$0.03).
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAMPUS CREST COMMUNITIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CAMPUS CREST COMMUNITIES INC is currently extremely low, coming in at 6.52%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.17% is significantly below that of the industry average.
- You can view the full Campus Crest Communities Ratings Report.
- Our dividend calendar.