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."Solar Senior Capital Dividend Yield: 9.40% Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 9.40%. Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 12.30. The average volume for Solar Senior Capital has been 62,000 shares per day over the past 30 days. Solar Senior Capital has a market cap of $173.1 million and is part of the financial services industry. Shares are down 17.2% 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 Solar Senior Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- SUNS's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues slightly increased by 8.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Capital Markets industry average. The net income increased by 30.6% when compared to the same quarter one year prior, rising from $1.49 million to $1.94 million.
- Net operating cash flow has significantly increased by 135.72% to $4.69 million when compared to the same quarter last year. In addition, SOLAR SENIOR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -127.80%.
- The gross profit margin for SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 75.09%. Regardless of SUNS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SUNS's net profit margin of 37.78% significantly outperformed against the industry.
- SOLAR SENIOR CAPITAL LTD has improved earnings per share by 30.8% 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, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.11 versus $1.46 in the prior year. This year, the market expects an improvement in earnings ($1.17 versus $1.11).
- You can view the full Solar Senior Capital Ratings Report.
- 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. Compared to other companies in the Capital Markets industry and the overall market, HERCULES TECH GROWTH CAP INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for HERCULES TECH GROWTH CAP INC is currently very high, coming in at 83.24%. Regardless of HTGC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HTGC's net profit margin of 38.79% significantly outperformed against the industry.
- HTGC, with its decline in revenue, slightly underperformed the industry average of 6.9%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- HERCULES TECH GROWTH CAP INC's earnings per share declined by 41.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, HERCULES TECH GROWTH CAP INC increased its bottom line by earning $1.62 versus $0.92 in the prior year. For the next year, the market is expecting a contraction of 25.9% in earnings ($1.20 versus $1.62).
- In its most recent trading session, HTGC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 Hercules Technology Growth Capital Ratings Report.
- EDUC's revenue growth has slightly outpaced the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 19.1%. 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.
- The gross profit margin for EDUCATIONAL DEVELOPMENT CORP is rather high; currently it is at 55.74%. 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 -0.05% trails the industry average.
- EDUC's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that EDUC's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
- Compared to its closing price of one year ago, EDUC's share price has jumped by 48.26%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- 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. Compared to other companies in the Distributors industry and the overall market, EDUCATIONAL DEVELOPMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Educational Development Ratings Report.
- Our dividend calendar.