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: 10.10% Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 10.10%. 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 8.91. The average volume for Medallion Financial has been 234,300 shares per day over the past 30 days. Medallion Financial has a market cap of $244.7 million and is part of the financial services industry. Shares are down 1.8% 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 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 growth in earnings per share. 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 5.6%. 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.
- MEDALLION FINANCIAL CORP has improved earnings per share by 7.4% 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, MEDALLION FINANCIAL CORP reported lower earnings of $1.14 versus $1.16 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $1.14).
- 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 Capital Markets industry and the overall market, MEDALLION FINANCIAL CORP's return on equity is below that of both the industry average and the S&P 500.
- TAXI has underperformed the S&P 500 Index, declining 19.55% 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.