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."Resource Capital Dividend Yield: 15.80% Resource Capital (NYSE: RSO) shares currently have a dividend yield of 15.80%. Resource Capital Corp., a diversified real estate investment trust, primarily focuses on originating, holding, and managing commercial mortgage loans and other commercial real estate-related debt and equity investments in the United States. The company has a P/E ratio of 18.11. The average volume for Resource Capital has been 839,200 shares per day over the past 30 days. Resource Capital has a market cap of $669.5 million and is part of the real estate industry. Shares are up 0.6% year-to-date as of the close of trading on Monday. 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 Resource Capital as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 13.7%. Since the same quarter one year prior, revenues rose by 30.3%. 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 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 46.6% when compared to the same quarter one year ago, falling from $24.12 million to $12.87 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, RESOURCE CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Resource Capital Ratings Report.
- The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.71, which clearly demonstrates the ability to cover short-term cash needs.
- 37.75% is the gross profit margin for CVR PARTNERS LP which we consider to be strong. Regardless of UAN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UAN's net profit margin of 19.05% significantly outperformed against the industry.
- Net operating cash flow has decreased to $19.69 million or 10.09% 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.
- 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 Chemicals industry. The net income has significantly decreased by 35.5% when compared to the same quarter one year ago, falling from $19.71 million to $12.72 million.
- You can view the full CVR Partners Ratings Report.
- The gross profit margin for GLADSTONE INVESTMENT CORP/DE is rather high; currently it is at 65.24%. Regardless of GAIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GAIN's net profit margin of 29.73% compares favorably to the industry average.
- GAIN, with its decline in revenue, underperformed when compared the industry average of 1.4%. Since the same quarter one year prior, revenues fell by 20.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- GLADSTONE INVESTMENT CORP/DE 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, GLADSTONE INVESTMENT CORP/DE swung to a loss, reporting -$0.06 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus -$0.06).
- 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 81.9% when compared to the same quarter one year ago, falling from $14.94 million to $2.70 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Capital Markets industry and the overall market, GLADSTONE INVESTMENT CORP/DE's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Gladstone Investment Corporation Ratings Report.
- Our dividend calendar.