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." Medallion Financial Dividend Yield: 9.40% Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 9.40%. Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company engages in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. The company has a P/E ratio of 9.63. The average volume for Medallion Financial has been 213,200 shares per day over the past 30 days. Medallion Financial has a market cap of $264.5 million and is part of the financial services industry. Shares are up 6.8% year-to-date as of the close of trading on Wednesday. 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 Medallion Financial as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.4%. Since the same quarter one year prior, revenues rose by 28.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for MEDALLION FINANCIAL CORP is rather high; currently it is at 59.86%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 59.45% significantly outperformed against 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, MEDALLION FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Capital Markets industry average, but is greater than that of the S&P 500. The net income increased by 4.5% when compared to the same quarter one year prior, going from $6.77 million to $7.07 million.
- TAXI has underperformed the S&P 500 Index, declining 22.43% 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.
- You can view the full Medallion Financial Ratings Report.
- 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 211.9% when compared to the same quarter one year prior, rising from $13.50 million to $42.10 million.
- Net operating cash flow has remained constant at $57.13 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -42.26%.
- The gross profit margin for ALON USA PARTNERS LP is currently extremely low, coming in at 9.54%. Regardless of ALDW's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ALDW's net profit margin of 5.26% compares favorably to the industry average.
- Currently the debt-to-equity ratio of 1.61 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, ALDW maintains a poor quick ratio of 0.76, which illustrates the inability to avoid short-term cash problems.
- You can view the full Alon USA Partners Ratings Report.
- The revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues rose by 15.8%. 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 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 Oil, Gas & Consumable Fuels industry and the overall market, GOLAR LNG PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The share price of GOLAR LNG PARTNERS LP has not done very well: it is down 5.63% 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. 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.
- The debt-to-equity ratio is very high at 2.25 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full Golar LNG Partners Ratings Report.
- Our dividend calendar.