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: 11.50% Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 11.50%. 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 7.85. The average volume for Medallion Financial has been 268,700 shares per day over the past 30 days. Medallion Financial has a market cap of $215.5 million and is part of the financial services industry. Shares are down 9.3% year-to-date as of the close of trading on Tuesday. 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 191.13%.
- 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 30.21%, 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.
- AINV's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 5.9%. 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 APOLLO INVESTMENT CORP is currently very high, coming in at 71.72%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -11.48% is in-line with the industry average.
- Net operating cash flow has significantly increased by 166.66% to $113.51 million when compared to the same quarter last year. Despite an increase in cash flow, APOLLO INVESTMENT CORP's cash flow growth rate is still lower than the industry average growth rate of 191.13%.
- 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 Capital Markets industry and the overall market on the basis of return on equity, APOLLO INVESTMENT CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The share price of APOLLO INVESTMENT CORP has not done very well: it is down 8.61% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- You can view the full Apollo Investment Ratings Report.
- The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MCEP has a quick ratio of 1.57, which demonstrates the ability of the company to cover short-term liquidity needs.
- Despite the weak revenue results, MCEP has significantly outperformed against the industry average of 38.6%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 363.4% when compared to the same quarter one year ago, falling from $1.56 million to -$4.11 million.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP'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 Mid-Con Energy Partners Ratings Report.
- Our dividend calendar.