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 "Buy." Monroe Capital Dividend Yield: 9.40% Monroe Capital (NASDAQ: MRCC) shares currently have a dividend yield of 9.40%. Monroe Capital Corporation is a business development company specializing in senior, unitranche and junior secured debt and, to a lesser extent, unsecured debt and equity investments in middle-market companies. The fund focuses on companies with a maximum of $25 million in EBITDA per year. The company has a P/E ratio of 12.08. The average volume for Monroe Capital has been 90,600 shares per day over the past 30 days. Monroe Capital has a market cap of $179.5 million and is part of the real estate industry. Shares are up 2.7% year-to-date as of the close of trading on Friday. 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 Monroe Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year, growth in earnings per share, compelling growth in net income and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 35.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- MONROE CAPITAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MONROE CAPITAL CORP increased its bottom line by earning $1.45 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus $1.45).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 67.3% when compared to the same quarter one year prior, rising from $2.51 million to $4.20 million.
- The gross profit margin for MONROE CAPITAL CORP is rather high; currently it is at 66.58%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 48.39% significantly outperformed against the industry average.
- You can view the full Monroe Capital Ratings Report.