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."SMTP (NASDAQ: SMTP) shares currently have a dividend yield of 7.60%. SMTP, Inc. provides Internet-based services to facilitate email delivery worldwide. It offers services to enable businesses of various scales to outsource the sending of outbound emails. The company has a P/E ratio of 16.13. The average volume for SMTP has been 10,000 shares per day over the past 30 days. SMTP has a market cap of $31.6 million and is part of the internet industry. Shares are up 339.9% year-to-date as of the close of trading on Thursday. 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 SMTP 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, reasonable valuation levels, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.5%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- SMTP 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 25.02, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SMTP INC is currently very high, coming in at 82.68%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.96% trails the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- You can view the full SMTP Ratings Report.
- MCC's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 61.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MEDLEY 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. We feel that this trend should continue. During the past fiscal year, MEDLEY CAPITAL CORP increased its bottom line by earning $1.32 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $1.32).
- 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 425.5% when compared to the same quarter one year prior, rising from $3.16 million to $16.59 million.
- The gross profit margin for MEDLEY CAPITAL CORP is rather high; currently it is at 68.40%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.57% significantly outperformed against the industry average.
- Net operating cash flow has increased to -$64.69 million or 41.32% when compared to the same quarter last year. In addition, MEDLEY CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -96.17%.
- You can view the full Medley 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 4.66, 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 62.21%. 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 59.76% significantly outperformed against the industry.
- TNH, with its decline in revenue, underperformed when compared the industry average of 7.5%. Since the same quarter one year prior, revenues fell by 22.2%. 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 31.42%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 30.39% 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.
- Our dividend calendar.