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."Highway Holdings Dividend Yield: 13.30% Highway Holdings (NASDAQ: HIHO) shares currently have a dividend yield of 13.30%. Highway Holdings Limited, through its subsidiaries, manufactures and sells metal, plastic, electric, and electronic components, subassemblies, and finished products for original equipment manufacturers (OEM) and contract manufacturers. The company has a P/E ratio of 18.75. The average volume for Highway Holdings has been 15,400 shares per day over the past 30 days. Highway Holdings has a market cap of $11.4 million and is part of the industrial industry. Shares are up 7.1% 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 Highway Holdings as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- 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 3.1%. 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.
- BKCC's revenue growth has slightly outpaced the industry average of 1.6%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, BLACKROCK KELSO CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for BLACKROCK KELSO CAPITAL CORP is currently very high, coming in at 75.81%. It has increased significantly from the same period last year. Along with this, the net profit margin of 87.35% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 53.03% to -$51.77 million when compared to the same quarter last year. In addition, BLACKROCK KELSO CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -196.88%.
- 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 46.0% when compared to the same quarter one year prior, rising from $19.84 million to $28.97 million.
- You can view the full BlackRock Kelso Capital Corporation Ratings Report.
- NMFC's very impressive revenue growth greatly exceeded the industry average of 1.6%. Since the same quarter one year prior, revenues leaped by 57.7%. 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 NEW MOUNTAIN FINANCE CORP is currently very high, coming in at 75.68%. 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 21.35% trails the industry average.
- 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, NEW MOUNTAIN FINANCE CORP's return on equity is below that of both the industry average and the S&P 500.
- In its most recent trading session, NMFC 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.
- Net operating cash flow has significantly decreased to -$13.10 million or 120.72% when compared to the same quarter last year. Despite a decrease in cash flow of 120.72%, NEW MOUNTAIN FINANCE CORP is still significantly exceeding the industry average of -196.88%.
- You can view the full New Mountain Finance Ratings Report.
- Our dividend calendar.