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." TCP Capital Dividend Yield: 8.90% TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 8.90%. TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 10.49. The average volume for TCP Capital has been 181,500 shares per day over the past 30 days. TCP Capital has a market cap of $796.1 million and is part of the financial services industry. Shares are down 3.2% 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 TCP Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations and increase in net income. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 44.8%. 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 TCP CAPITAL CORP is currently very high, coming in at 81.43%. Regardless of TCPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCPC's net profit margin of 57.45% significantly outperformed against the industry.
- Net operating cash flow has increased to -$37.51 million or 14.12% when compared to the same quarter last year. Despite an increase in cash flow of 14.12%, TCP CAPITAL CORP is still growing at a significantly lower rate than the industry average of 189.33%.
- TCP CAPITAL CORP's earnings per share declined by 24.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TCP CAPITAL CORP reported lower earnings of $0.96 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $0.96).
- The company, on the basis of net income growth 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 increased by 2.2% when compared to the same quarter one year prior, going from $18.45 million to $18.86 million.
- You can view the full TCP Capital Ratings Report.