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." PennantPark Floating Rate Capital Dividend Yield: 7.60% PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 7.60%. PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 8.52. The average volume for PennantPark Floating Rate Capital has been 73,500 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $210.8 million and is part of the financial services industry. Shares are up 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 PennantPark Floating Rate Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- PFLT's very impressive revenue growth greatly exceeded the industry average of 2.5%. Since the same quarter one year prior, revenues leaped by 64.2%. 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 Capital Markets industry. The net income increased by 215.4% when compared to the same quarter one year prior, rising from $1.57 million to $4.94 million.
- Net operating cash flow has significantly increased by 153.15% to $27.18 million when compared to the same quarter last year. In addition, PENNANTPARK FLOATING RT CAP has also vastly surpassed the industry average cash flow growth rate of -89.07%.
- The gross profit margin for PENNANTPARK FLOATING RT CAP is rather high; currently it is at 68.48%. Regardless of PFLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFLT's net profit margin of 64.44% significantly outperformed against the industry.
- 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, PENNANTPARK FLOATING RT CAP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full PennantPark Floating Rate Capital Ratings Report.