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."American Capital Senior Floating Dividend Yield: 8.70% American Capital Senior Floating (NASDAQ: ACSF) shares currently have a dividend yield of 8.70%. American Capital Senior Floating, Ltd. is a close ended fixed income mutual fund launched by American Capital Asset Management, LLC. The fund is managed by American Capital ACSF Management, LLC. It invests in fixed income markets of the United States. The average volume for American Capital Senior Floating has been 35,300 shares per day over the past 30 days. American Capital Senior Floating has a market cap of $133.1 million and is part of the financial services industry. Shares are up 9.9% 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 American Capital Senior Floating as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. 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 4.2%. Since the same quarter one year prior, revenues rose by 24.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- AMERICAN CAPITAL SR FLTG LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.20 versus $0.37).
- Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, AMERICAN CAPITAL SR FLTG LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
- In its most recent trading session, ACSF 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full American Capital Senior Floating Ratings Report.
- FSFR's very impressive revenue growth greatly exceeded the industry average of 4.4%. Since the same quarter one year prior, revenues leaped by 587.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FIFTH STREET SR FLTG RATE CP has improved earnings per share by 5.5% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.25 versus $0.97).
- FSFR has underperformed the S&P 500 Index, declining 24.09% from its price level of one year ago.
- Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, FIFTH STREET SR FLTG RATE CP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to -$272.24 million or 218.63% 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 Fifth Street Senior Floating Rate Ratings Report.
- Net operating cash flow has slightly increased to $18.96 million or 5.25% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -42.26%.
- 47.91% is the gross profit margin for TRANSMONTAIGNE PARTNERS LP which we consider to be strong. Regardless of TLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TLP's net profit margin of 16.73% significantly outperformed against the industry.
- The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
- The share price of TRANSMONTAIGNE PARTNERS LP has not done very well: it is down 17.76% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TRANSMONTAIGNE PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full TransMontaigne Partners Ratings Report.
- Our dividend calendar.