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."TCP Capital Dividend Yield: 9.00% TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 9.00%. TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 10.28. The average volume for TCP Capital has been 198,800 shares per day over the past 30 days. TCP Capital has a market cap of $776.0 million and is part of the financial services industry. Shares are down 5.4% 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 TCP Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth 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:
- TCPC's very impressive revenue growth greatly exceeded the industry average of 4.4%. Since the same quarter one year prior, revenues leaped by 53.1%. 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 TCP CAPITAL CORP is currently very high, coming in at 79.21%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -20.82% is in-line with the industry average.
- TCP CAPITAL CORP 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TCP CAPITAL CORP reported lower earnings of $0.96 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $0.96).
- 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 145.2% when compared to the same quarter one year ago, falling from $14.80 million to -$6.69 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 Capital Markets industry and the overall market on the basis of return on equity, TCP 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 TCP Capital Ratings Report.
- CRT 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 9.60, 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CROSS TIMBERS ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Despite the weak revenue results, CRT has outperformed against the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 12.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 13.4% when compared to the same quarter one year ago, dropping from $3.97 million to $3.44 million.
- Looking at the price performance of CRT's shares over the past 12 months, there is not much good news to report: the stock is down 29.91%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full Cross Timbers Royalty Ratings Report.
- UMH's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 12.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 313.4% when compared to the same quarter one year prior, rising from -$0.73 million to $1.56 million.
- UMH PROPERTIES INC 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, UMH PROPERTIES INC reported poor results of -$0.15 versus -$0.09 in the prior year. This year, the market expects an improvement in earnings (-$0.13 versus -$0.15).
- The gross profit margin for UMH PROPERTIES INC is rather low; currently it is at 21.35%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, UMH's net profit margin of 7.61% 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, UMH PROPERTIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full UMH Properties Ratings Report.
- Our dividend calendar.