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." Knightsbridge Shipping Dividend Yield: 11.80% Knightsbridge Shipping (NASDAQ: VLCCF) shares currently have a dividend yield of 11.80%. Knightsbridge Shipping Limited, a shipping company, engages in the seaborne transportation of dry bulk cargoes worldwide. As of October 7, 2014, it owned and operated a fleet of 27 Capesize dry bulk carriers. The company has a P/E ratio of 48.43. The average volume for Knightsbridge Shipping has been 877,100 shares per day over the past 30 days. Knightsbridge Shipping has a market cap of $543.2 million and is part of the transportation industry. Shares are down 20% 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 Knightsbridge Shipping as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures 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 feeble growth in the company's earnings per share. Highlights from the ratings report include:
- VLCCF's very impressive revenue growth greatly exceeded the industry average of 23.6%. Since the same quarter one year prior, revenues leaped by 168.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- VLCCF's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- KNIGHTSBRIDGE SHIPPING LTD reported significant earnings per share improvement 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, KNIGHTSBRIDGE SHIPPING LTD reported lower earnings of $0.11 versus $0.25 in the prior year. For the next year, the market is expecting a contraction of 109.1% in earnings (-$0.01 versus $0.11).
- VLCCF has underperformed the S&P 500 Index, declining 19.10% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full Knightsbridge Shipping Ratings Report.
- SIR's revenue growth has slightly outpaced the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 16.6%. 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 SELECT INCOME REIT is rather high; currently it is at 52.85%. Regardless of SIR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SIR's net profit margin of 41.84% significantly outperformed against the industry.
- SELECT INCOME REIT's earnings per share declined by 14.9% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, SELECT INCOME REIT increased its bottom line by earning $2.11 versus $2.10 in the prior year. For the next year, the market is expecting a contraction of 3.8% in earnings ($2.03 versus $2.11).
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, SELECT INCOME REIT's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Select Income REIT Ratings Report.
- TICC's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 9.9%. 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 gross profit margin for TICC CAPITAL CORP is currently very high, coming in at 74.51%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -4.18% is in-line with the industry average.
- TICC CAPITAL 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TICC CAPITAL CORP reported lower earnings of $1.11 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $1.11).
- 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 105.3% when compared to the same quarter one year ago, falling from $23.59 million to -$1.26 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, TICC CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full TICC Capital Ratings Report.
- Our dividend calendar.