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."Solar Senior Capital Dividend Yield: 8.60% Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 8.60%. Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 14.09. The average volume for Solar Senior Capital has been 30,800 shares per day over the past 30 days. Solar Senior Capital has a market cap of $188.6 million and is part of the financial services industry. Shares are up 9.2% year-to-date as of the close of trading on Thursday. 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 Solar Senior Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. 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 4.6%. 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 SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 79.92%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 67.92% significantly outperformed against the industry average.
- SOLAR SENIOR CAPITAL LTD's earnings per share declined by 28.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.02 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.39 versus $1.02).
- The share price of SOLAR SENIOR CAPITAL LTD has not done very well: it is down 5.23% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 -$123.12 million or 354.07% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Solar Senior Capital Ratings Report.
- The revenue growth came in higher than the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 13.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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. Compared to other companies in the Diversified Financial Services industry and the overall market, COMPASS DIVERSIFIED HOLDINGS's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 215.9% when compared to the same quarter one year prior, rising from -$6.35 million to $7.36 million.
- Net operating cash flow has increased to $24.54 million or 33.81% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.72%.
- You can view the full Compass Diversified Holdings Ratings Report.
- DMLP 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 26.87, which clearly demonstrates the ability to cover short-term cash needs.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, DORCHESTER MINERALS -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for DORCHESTER MINERALS -LP is currently very high, coming in at 91.97%. Regardless of DMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DMLP's net profit margin of 61.54% significantly outperformed against the industry.
- DORCHESTER MINERALS -LP's earnings per share declined by 34.1% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, DORCHESTER MINERALS -LP increased its bottom line by earning $1.42 versus $1.37 in the prior year.
- DMLP, with its decline in revenue, slightly underperformed the industry average of 19.6%. Since the same quarter one year prior, revenues fell by 25.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full Dorchester Minerals Ratings Report.
- Our dividend calendar.