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." Prospect Capital Corporation Dividend Yield: 12.00% Prospect Capital Corporation (NASDAQ: PSEC) shares currently have a dividend yield of 12.00%. Prospect Capital Corporation is a business development company. The company has a P/E ratio of 8.43. The average volume for Prospect Capital Corporation has been 2,112,300 shares per day over the past 30 days. Prospect Capital Corporation has a market cap of $3.0 billion and is part of the financial services industry. Shares are up 0.6% year-to-date as of the close of trading on Friday. 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 Prospect Capital Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and disappointing return on equity. Highlights from the ratings report include:
- PSEC's revenue growth has slightly outpaced the industry average of 4.4%. Since the same quarter one year prior, revenues rose by 11.7%. 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 PROSPECT CAPITAL CORP is rather high; currently it is at 67.16%. Regardless of PSEC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PSEC's net profit margin of 43.22% significantly outperformed against the industry.
- Net operating cash flow has significantly increased by 56.83% to -$125.47 million when compared to the same quarter last year. Despite an increase in cash flow of 56.83%, PROSPECT CAPITAL CORP is still growing at a significantly lower rate than the industry average of 141.93%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PSEC has underperformed the S&P 500 Index, declining 22.76% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- PROSPECT CAPITAL CORP's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, PROSPECT CAPITAL CORP increased its bottom line by earning $1.08 versus $1.07 in the prior year. For the next year, the market is expecting a contraction of 1.9% in earnings ($1.06 versus $1.08).
- You can view the full Prospect Capital Corporation Ratings Report.
- The revenue growth came in higher than the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 27.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- RAMCO-GERSHENSON PROPERTIES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RAMCO-GERSHENSON PROPERTIES swung to a loss, reporting -$0.12 versus $0.02 in the prior year. This year, the market expects an improvement in earnings ($0.24 versus -$0.12).
- The gross profit margin for RAMCO-GERSHENSON PROPERTIES is currently lower than what is desirable, coming in at 27.60%. Regardless of RPT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RPT's net profit margin of 15.62% is significantly lower than the industry average.
- 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, RAMCO-GERSHENSON PROPERTIES's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Ramco-Gershenson Properties Ratings Report.
- KRG's very impressive revenue growth greatly exceeded the industry average of 9.8%. Since the same quarter one year prior, revenues leaped by 103.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- This stock has managed to rise its share value by 5.64% over the past twelve months. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, KITE REALTY GROUP TRUST's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for KITE REALTY GROUP TRUST is rather low; currently it is at 21.47%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.26% significantly trails the industry average.
- You can view the full Kite Realty Group Ratings Report.
- Our dividend calendar.