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."FS Investment Dividend Yield: 8.50% FS Investment (NYSE: FSIC) shares currently have a dividend yield of 8.50%. FS Investment Corporation is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. The company has a P/E ratio of 10.24. The average volume for FS Investment has been 815,400 shares per day over the past 30 days. FS Investment has a market cap of $2.5 billion and is part of the financial services industry. Shares are up 5% 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 FS Investment as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow. Highlights from the ratings report include:
- The gross profit margin for FS INVESTMENT CORP is rather high; currently it is at 63.47%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 64.82% significantly outperformed against the industry average.
- When compared to other companies in the Capital Markets industry and the overall market, FS INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
- FS INVESTMENT CORP's earnings per share declined by 6.5% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.01 versus $0.78).
- The company, on the basis of change in net income 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 has decreased by 12.0% when compared to the same quarter one year ago, dropping from $80.06 million to $70.43 million.
- Net operating cash flow has significantly decreased to $23.21 million or 74.64% 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 FS Investment Ratings Report.
- The revenue growth greatly exceeded the industry average of 2.5%. Since the same quarter one year prior, revenues rose by 28.7%. 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.
- Net operating cash flow has slightly increased to $52.40 million or 8.28% when compared to the same quarter last year. In addition, CONSOLIDATED COMM HLDGS INC has also modestly surpassed the industry average cash flow growth rate of 5.21%.
- The gross profit margin for CONSOLIDATED COMM HLDGS INC is rather high; currently it is at 58.51%. Regardless of CNSL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.05% trails the industry average.
- Although CNSL's debt-to-equity ratio of 4.34 is very high, it is currently less than that of the industry average. To add to this, CNSL has a quick ratio of 0.64, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CONSOLIDATED COMM HLDGS INC'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 Consolidated Communications Ratings Report.
- NMM's revenue growth has slightly outpaced the industry average of 1.5%. 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.
- Net operating cash flow has decreased to $27.34 million or 24.66% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- 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.
- Our dividend calendar.