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." TCP Capital Dividend Yield: 8.40% TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 8.40%. TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 11.05. The average volume for TCP Capital has been 266,000 shares per day over the past 30 days. TCP Capital has a market cap of $732.9 million and is part of the financial services industry. Shares are up 2% 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 TCP 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, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- TCPC's very impressive revenue growth greatly exceeded the industry average of 1.2%. Since the same quarter one year prior, revenues leaped by 69.9%. 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 net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 26.9% when compared to the same quarter one year prior, rising from $9.77 million to $12.40 million.
- The gross profit margin for TCP CAPITAL CORP is currently very high, coming in at 80.84%. Regardless of TCPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCPC's net profit margin of 50.44% 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, TCP CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- TCP CAPITAL CORP's earnings per share declined by 17.5% 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, TCP CAPITAL CORP increased its bottom line by earning $1.94 versus $1.20 in the prior year. For the next year, the market is expecting a contraction of 20.6% in earnings ($1.54 versus $1.94).
- You can view the full TCP Capital Ratings Report.
- SUBURBAN PROPANE PRTNRS -LP has improved earnings per share by 14.3% 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, SUBURBAN PROPANE PRTNRS -LP increased its bottom line by earning $1.55 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $1.55).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.5%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Gas Utilities industry average, but is greater than that of the S&P 500. The net income increased by 13.3% when compared to the same quarter one year prior, going from -$63.12 million to -$54.72 million.
- In its most recent trading session, SPH 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. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
- You can view the full Suburban Propane Partners Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 1.0%. 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 FIDUS INVESTMENT CORP is rather high; currently it is at 69.14%. It has increased significantly from the same period last year. Along with this, the net profit margin of 32.39% is above that of the industry average.
- Net operating cash flow has significantly increased by 118.79% to $4.90 million when compared to the same quarter last year. In addition, FIDUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -193.96%.
- FIDUS INVESTMENT CORP 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. 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, FIDUS INVESTMENT CORP increased its bottom line by earning $2.01 versus $1.91 in the prior year. For the next year, the market is expecting a contraction of 21.4% in earnings ($1.58 versus $2.01).
- The share price of FIDUS INVESTMENT CORP has not done very well: it is down 15.54% 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, 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 Fidus Investment Ratings Report.
- Our dividend calendar.