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: 8.60% Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 8.60%. 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 10.00. The average volume for Medallion Financial has been 206,800 shares per day over the past 30 days. Medallion Financial has a market cap of $279.3 million and is part of the financial services industry. Shares are down 23.6% 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 Medallion Financial as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 19.7%. 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 MEDALLION FINANCIAL CORP is rather high; currently it is at 64.70%. Regardless of TAXI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAXI's net profit margin of 58.13% significantly outperformed against the industry.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Capital Markets industry average. The net income increased by 4.6% when compared to the same quarter one year prior, going from $6.40 million to $6.69 million.
- Looking at the price performance of TAXI's shares over the past 12 months, there is not much good news to report: the stock is down 33.76%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
- MEDALLION FINANCIAL CORP's earnings per share declined by 6.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, MEDALLION FINANCIAL CORP reported lower earnings of $1.16 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 1.7% in earnings ($1.14 versus $1.16).
- You can view the full Medallion Financial Ratings Report.
- FDUS's revenue growth has slightly outpaced the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 10.3%. 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 FIDUS INVESTMENT CORP is rather high; currently it is at 67.05%. Regardless of FDUS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FDUS's net profit margin of 46.81% significantly outperformed against the industry.
- FIDUS INVESTMENT CORP has improved earnings per share by 15.2% 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 year. However, we anticipate underperformance relative to this pattern 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 company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income increased by 16.8% when compared to the same quarter one year prior, going from $4.54 million to $5.30 million.
- Net operating cash flow has significantly decreased to -$28.54 million or 180.94% when compared to the same quarter last year. Despite a decrease in cash flow of 180.94%, FIDUS INVESTMENT CORP is in line with the industry average cash flow growth rate of -183.78%.
- You can view the full Fidus Investment Ratings Report.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
- HIGHWAY HOLDINGS LTD reported significant earnings per share improvement 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. During the past fiscal year, HIGHWAY HOLDINGS LTD increased its bottom line by earning $0.16 versus $0.12 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 143.1% when compared to the same quarter one year prior, rising from $0.15 million to $0.37 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.5%. Since the same quarter one year prior, revenues slightly increased by 0.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HIHO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.08, which clearly demonstrates the ability to cover short-term cash needs.
- You can view the full Highway Holdings Ratings Report.
- Our dividend calendar.