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: 12.10% Medallion Financial (NASDAQ: TAXI) shares currently have a dividend yield of 12.10%. 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 7.47. The average volume for Medallion Financial has been 275,900 shares per day over the past 30 days. Medallion Financial has a market cap of $203.9 million and is part of the financial services industry. Shares are down 18.5% 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 Medallion Financial 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 feeble growth in the company's earnings per share. Highlights from the ratings report include:
- TAXI's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 9.7%. 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 Capital Markets industry. The net income increased by 13.8% when compared to the same quarter one year prior, going from $7.10 million to $8.09 million.
- MEDALLION FINANCIAL CORP has improved earnings per share by 17.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MEDALLION FINANCIAL CORP reported lower earnings of $1.14 versus $1.16 in the prior year. For the next year, the market is expecting a contraction of 3.9% in earnings ($1.10 versus $1.14).
- 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 27.35%, 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 137.7% when compared to the same quarter one year prior, rising from -$28.54 million to $10.75 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 4.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has slightly increased to $33.41 million or 3.07% when compared to the same quarter last year. Despite an increase in cash flow, INVESTORS REAL ESTATE TRUST's average is still marginally south of the industry average growth rate of 12.34%.
- The gross profit margin for INVESTORS REAL ESTATE TRUST is currently lower than what is desirable, coming in at 30.60%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, IRET's net profit margin of 15.07% is significantly lower than the industry average.
- IRET has underperformed the S&P 500 Index, declining 15.68% 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.
- You can view the full Investors Real Estate Ratings Report.
- Net operating cash flow has increased to $20.31 million or 30.69% when compared to the same quarter last year. In addition, LRR ENERGY LP has also vastly surpassed the industry average cash flow growth rate of -20.65%.
- LRE, with its decline in revenue, slightly underperformed the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 38.4%. 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 204.1% when compared to the same quarter one year ago, falling from -$7.34 million to -$22.31 million.
- Currently the debt-to-equity ratio of 1.86 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, LRE maintains a poor quick ratio of 0.76, which illustrates the inability to avoid short-term cash problems.
- You can view the full LRR Energy Ratings Report.
- Our dividend calendar.