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." Medallion Financial Dividend Yield: 7.90% Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 7.90%. Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company is engaged in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. The company has a P/E ratio of 10.81. The average volume for Medallion Financial has been 243,500 shares per day over the past 30 days. Medallion Financial has a market cap of $307.2 million and is part of the financial services industry. Shares are down 15.2% year-to-date as of the close of trading on Wednesday. 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 Medallion Financial as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.5%. Since the same quarter one year prior, revenues rose by 26.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 59.38%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 71.16% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 70.81% to $7.84 million when compared to the same quarter last year. In addition, MEDALLION FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of -89.07%.
- 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 13.7% when compared to the same quarter one year prior, going from $6.25 million to $7.10 million.
- TAXI has underperformed the S&P 500 Index, declining 15.76% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Medallion Financial Ratings Report.
- 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. 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.
- LEGACY RESERVES LP 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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LEGACY RESERVES LP swung to a loss, reporting -$0.62 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($0.15 versus -$0.62).
- LGCY, with its decline in revenue, underperformed when compared the industry average of 3.1%. Since the same quarter one year prior, revenues fell by 26.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 46.26% is the gross profit margin for LEGACY RESERVES LP which we consider to be strong. Regardless of LGCY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LGCY's net profit margin of -15.59% significantly underperformed when compared to the industry average.
- Net operating cash flow has decreased to $43.60 million or 35.30% 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 Legacy Reserves Ratings Report.
- The revenue growth came in higher than the industry average of 2.5%. Since the same quarter one year prior, revenues rose by 25.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 73.79%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 58.08% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 68.69% to -$51.69 million when compared to the same quarter last year. In addition, GOLUB CAPITAL BDC INC has also vastly surpassed the industry average cash flow growth rate of -89.07%.
- 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 28.6% when compared to the same quarter one year prior, rising from $12.66 million to $16.28 million.
- GOLUB CAPITAL BDC INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern 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.