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." Solar Capital Dividend Yield: 8.40% Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 8.40%. Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 17.55. The average volume for Solar Capital has been 166,300 shares per day over the past 30 days. Solar Capital has a market cap of $804.7 million and is part of the financial services industry. Shares are up 5.3% year-to-date as of the close of trading on Tuesday. 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 Capital as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for SOLAR CAPITAL LTD is currently very high, coming in at 70.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 42.52% significantly outperformed against the industry average.
- SLRC, with its decline in revenue, underperformed when compared the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 21.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- SOLAR CAPITAL LTD's earnings per share declined by 16.1% in the most recent quarter compared to 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, SOLAR CAPITAL LTD reported lower earnings of $1.12 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $1.12).
- Net operating cash flow has significantly decreased to -$23.67 million or 123.89% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SLRC has underperformed the S&P 500 Index, declining 11.91% from its price level of one year ago. 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 Solar Capital Ratings Report.
- NMM's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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 gross profit margin for NAVIOS MARITIME PARTNERS LP is currently very high, coming in at 92.94%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.15% significantly outperformed against the industry average.
- NMM's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.75 is very high and demonstrates very strong liquidity.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 45.83% 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, 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 Marine industry. The net income has significantly decreased by 40.7% when compared to the same quarter one year ago, falling from $18.36 million to $10.88 million.
- You can view the full Navios Maritime Partners L.P Ratings Report.
- The gross profit margin for TICC CAPITAL CORP is currently very high, coming in at 73.07%. 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 -99.73% is in-line with the industry average.
- TICC, with its decline in revenue, underperformed when compared the industry average of 5.2%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- TICC 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, TICC CAPITAL CORP swung to a loss, reporting -$0.05 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus -$0.05).
- 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 318.1% when compared to the same quarter one year ago, falling from $13.06 million to -$28.48 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Capital Markets industry and the overall market, TICC CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full TICC Capital Ratings Report.
- Our dividend calendar.