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." Solar Senior Capital Dividend Yield: 8.60% Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 8.60%. Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 14.11. The average volume for Solar Senior Capital has been 36,100 shares per day over the past 30 days. Solar Senior Capital has a market cap of $188.8 million and is part of the financial services industry. Shares are up 8.6% 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 Solar Senior Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- SUNS's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 7.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The gross profit margin for SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 76.64%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 66.51% significantly outperformed against the industry average.
- SOLAR SENIOR CAPITAL LTD reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.02 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $1.02).
- 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 2.5% when compared to the same quarter one year prior, going from $3.99 million to $4.09 million.
- In its most recent trading session, SUNS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Solar Senior Capital Ratings Report.