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." Capitala Finance Dividend Yield: 11.20% Capitala Finance (NASDAQ: CPTA) shares currently have a dividend yield of 11.20%. Capitala Finance Corp. is a Business Development Company specializing in investments in traditional mezzanine, senior subordinated and unitranche debt, second-lien loans, equity securities issued by lower and traditional middle-market companies, and small and middle-market companies. The company has a P/E ratio of 14.94. The average volume for Capitala Finance has been 134,500 shares per day over the past 30 days. Capitala Finance has a market cap of $275.7 million and is part of the financial services industry. Shares are down 6.4% 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 Capitala Finance as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow. Highlights from the ratings report include:
- CPTA's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 13.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for CAPITALA FINANCE CORP is rather high; currently it is at 67.33%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 70.27% significantly outperformed against the industry average.
- Compared to other companies in the Capital Markets industry and the overall market, CAPITALA FINANCE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- CPTA has underperformed the S&P 500 Index, declining 8.63% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- Net operating cash flow has decreased to -$31.10 million or 11.23% 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 Capitala Finance Ratings Report.
- The gross profit margin for CAPSTEAD MORTGAGE CORP is currently very high, coming in at 94.05%. Regardless of CMO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CMO's net profit margin of 57.75% significantly outperformed against the industry.
- CMO, with its decline in revenue, slightly underperformed the industry average of 8.5%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Net operating cash flow has declined marginally to $58.85 million or 4.15% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CAPSTEAD MORTGAGE CORP has marginally lower results.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 11.5% when compared to the same quarter one year ago, dropping from $38.39 million to $33.96 million.
- You can view the full Capstead Mortgage Ratings Report.
- FGP, with its decline in revenue, slightly underperformed the industry average of 20.2%. Since the same quarter one year prior, revenues fell by 26.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FERRELLGAS PARTNERS -LP's earnings per share declined by 24.6% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FERRELLGAS PARTNERS -LP reported lower earnings of $0.40 versus $0.68 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus $0.40).
- The gross profit margin for FERRELLGAS PARTNERS -LP is rather low; currently it is at 20.99%. Regardless of FGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.72% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Gas Utilities industry average. The net income has decreased by 21.1% when compared to the same quarter one year ago, dropping from $45.39 million to $35.81 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, FGP has underperformed the S&P 500 Index, declining 14.83% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full Ferrellgas Partners Ratings Report.
- Our dividend calendar.