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."ATA (NASDAQ: ATAI) shares currently have a dividend yield of 8.30%. ATA Inc. provides computer-based testing services in the People's Republic of China. The company has a P/E ratio of 23.40. The average volume for ATA has been 17,900 shares per day over the past 30 days. ATA has a market cap of $107.9 million and is part of the diversified services industry. Shares are up 14.7% year-to-date as of the close of trading on Friday. 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 ATA as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and unimpressive growth in net income. Highlights from the ratings report include:
- ATAI 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 4.97, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for ATA INC -ADS is rather high; currently it is at 58.58%. 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 -29.03% is in-line with the industry average.
- The share price of ATA INC -ADS has not done very well: it is down 9.48% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- 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 Diversified Consumer Services industry. The net income has significantly decreased by 139.9% when compared to the same quarter one year ago, falling from -$0.97 million to -$2.33 million.
- You can view the full ATA Ratings Report.
- TCRD's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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.
- Net operating cash flow has significantly increased by 130.02% to $13.16 million when compared to the same quarter last year. In addition, THL CREDIT INC has also vastly surpassed the industry average cash flow growth rate of -89.49%.
- The gross profit margin for THL CREDIT INC is rather high; currently it is at 67.49%. Regardless of TCRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCRD's net profit margin of 39.09% significantly outperformed against the industry.
- 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 40.5% when compared to the same quarter one year ago, falling from $15.62 million to $9.28 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, THL CREDIT INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full THL Credit Ratings Report.
- The revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 29.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 86.6% when compared to the same quarter one year prior, rising from -$46.58 million to -$6.25 million.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, EVEP's quick ratio is somewhat strong at 1.17, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has decreased to $32.63 million or 21.15% 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 EV Energy Partners Ratings Report.
- Our dividend calendar.