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."PennantPark Floating Rate Capital Dividend Yield: 8.10% PennantPark Floating Rate Capital (NASDAQ: PFLT) shares currently have a dividend yield of 8.10%. PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. The company has a P/E ratio of 10.22. The average volume for PennantPark Floating Rate Capital has been 60,600 shares per day over the past 30 days. PennantPark Floating Rate Capital has a market cap of $210.2 million and is part of the financial services industry. Shares are up 2.8% year-to-date as of the close of trading on Monday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates PennantPark Floating Rate Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 9.2%. 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.
- Net operating cash flow has significantly increased by 134.92% to $12.19 million when compared to the same quarter last year. In addition, PENNANTPARK FLOATING RT CAP has also vastly surpassed the industry average cash flow growth rate of -34.43%.
- The gross profit margin for PENNANTPARK FLOATING RT CAP is currently very high, coming in at 84.98%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, PFLT's net profit margin of 5.85% significantly trails the industry average.
- In its most recent trading session, PFLT 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. 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.
- PENNANTPARK FLOATING RT CAP 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, PENNANTPARK FLOATING RT CAP increased its bottom line by earning $1.38 versus $1.30 in the prior year. For the next year, the market is expecting a contraction of 6.5% in earnings ($1.29 versus $1.38).
- You can view the full PennantPark Floating Rate Capital Ratings Report.
- The revenue growth came in higher than the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 7.7%. 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 GOLUB CAPITAL BDC INC is currently very high, coming in at 73.52%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 55.08% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 70.59% to -$40.85 million when compared to the same quarter last year. In addition, GOLUB CAPITAL BDC INC has also vastly surpassed the industry average cash flow growth rate of -34.43%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 2.3% when compared to the same quarter one year prior, going from $14.84 million to $15.17 million.
- 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, GOLUB CAPITAL BDC INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Golub Capital BDC Ratings Report.
- The revenue growth came in higher than the industry average of 10.0%. Since the same quarter one year prior, revenues rose by 28.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MNDO 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 3.36, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Software industry and the overall market, MIND CTI LTD's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 59.29% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MNDO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full Mind C T I Ratings Report.
- Our dividend calendar.