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." 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 12.15. The average volume for Monroe Capital has been 86,800 shares per day over the past 30 days. Monroe Capital has a market cap of $180.5 million and is part of the real estate industry. Shares are up 3.8% year-to-date as of the close of trading on Wednesday. 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 hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall. 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 24.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 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, MONROE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to -$15.10 million or 2.38% 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 Monroe Capital Ratings Report.
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 24.7%. 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 significantly increased by 409.73% to $338.15 million when compared to the same quarter last year. In addition, ELLINGTON FINANCIAL LLC has also vastly surpassed the industry average cash flow growth rate of 189.33%.
- The gross profit margin for ELLINGTON FINANCIAL LLC is currently very high, coming in at 76.30%. Regardless of EFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EFC's net profit margin of 71.85% significantly outperformed against the industry.
- 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 14.9% when compared to the same quarter one year ago, dropping from $22.64 million to $19.26 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Capital Markets industry and the overall market, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ellington Financial Ratings Report.
- VOC 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.
- The gross profit margin for VOC ENERGY TRUST is currently very high, coming in at 100.00%. VOC has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, VOC's net profit margin of 94.76% significantly outperformed against the industry.
- VOC ENERGY TRUST has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, VOC ENERGY TRUST increased its bottom line by earning $1.85 versus $1.68 in the prior year.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, VOC ENERGY TRUST has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 82.5% when compared to the same quarter one year ago, falling from $9.69 million to $1.70 million.
- You can view the full VOC Energy Ratings Report.
- Our dividend calendar.