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: 9.50% Monroe Capital (NASDAQ: MRCC) shares currently have a dividend yield of 9.50%. 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 12.02. The average volume for Monroe Capital has been 83,000 shares per day over the past 30 days. Monroe Capital has a market cap of $178.6 million and is part of the real estate industry. Shares are up 3% 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 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 5.9%. 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 0.2%. Since the same quarter one year prior, revenues rose by 12.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Marine industry. The net income increased by 18.3% when compared to the same quarter one year prior, going from $18.03 million to $21.33 million.
- SEASPAN CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEASPAN CORP reported lower earnings of $0.78 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.78).
- SSW has underperformed the S&P 500 Index, declining 14.61% 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 $64.37 million or 13.21% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, SEASPAN CORP has marginally lower results.
- You can view the full Seaspan Ratings Report.
- The revenue growth greatly exceeded the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 45.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ARES COMMERCIAL REAL ESTATE has improved earnings per share by 47.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARES COMMERCIAL REAL ESTATE increased its bottom line by earning $0.85 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.85).
- The gross profit margin for ARES COMMERCIAL REAL ESTATE is rather high; currently it is at 65.96%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 24.67% trails the industry average.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, ARES COMMERCIAL REAL ESTATE's return on equity is below that of both the industry average and the S&P 500.
- ACRE has underperformed the S&P 500 Index, declining 7.10% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full Ares Commercial Real Estate Ratings Report.
- Our dividend calendar.