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: 10.40% Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 10.40%. 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 8.64. The average volume for Medallion Financial has been 250,700 shares per day over the past 30 days. Medallion Financial has a market cap of $237.3 million and is part of the financial services industry. Shares are down 6.3% 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 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 good cash flow from operations. 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 5.7%. 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 60.17%. 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.
- Net operating cash flow has significantly increased by 127.28% to $0.78 million when compared to the same quarter last year. Despite an increase in cash flow of 127.28%, MEDALLION FINANCIAL CORP is still growing at a significantly lower rate than the industry average of 189.33%.
- 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's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 28.17%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full Medallion Financial Ratings Report.
- DEST has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.30 is very weak and demonstrates a lack of ability to pay short-term obligations.
- 49.31% is the gross profit margin for DESTINATION MATERNITY CORP which we consider to be strong. Regardless of DEST'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 -2.03% trails the industry average.
- 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 Specialty Retail industry and the overall market, DESTINATION MATERNITY CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to -$2.00 million or 323.48% 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 Destination Maternity Ratings Report.
- The revenue growth greatly exceeded the industry average of 2.2%. 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 5.29%.
- 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.
- Our dividend calendar.