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."TAL International Group Dividend Yield: 16.70% TAL International Group (NYSE: TAL) shares currently have a dividend yield of 16.70%. TAL International Group, Inc., together with its subsidiaries, leases intermodal transportation equipment and provides maritime container management services worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 4.70. The average volume for TAL International Group has been 453,800 shares per day over the past 30 days. TAL International Group has a market cap of $572.0 million and is part of the diversified services industry. Shares are down 61.3% 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 TAL International Group as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.5%. Since the same quarter one year prior, revenues slightly increased by 2.3%. 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.
- Net operating cash flow has slightly increased to $111.89 million or 7.81% when compared to the same quarter last year. Despite an increase in cash flow, TAL INTERNATIONAL GROUP INC's cash flow growth rate is still lower than the industry average growth rate of 31.32%.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Trading Companies & Distributors industry average, but is greater than that of the S&P 500. The net income has decreased by 9.2% when compared to the same quarter one year ago, dropping from $29.36 million to $26.67 million.
- The debt-to-equity ratio is very high at 4.77 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full TAL International Group Ratings Report.
- The revenue growth came in higher than the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 22.4%. 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 FS INVESTMENT CORP is currently very high, coming in at 76.20%. It has increased significantly from the same period last year. Along with this, the net profit margin of 35.00% significantly outperformed against the industry average.
- When compared to other companies in the Capital Markets industry and the overall market, FS INVESTMENT CORP's return on equity is below that of both the industry average and the S&P 500.
- After a year of stock price fluctuations, the net result is that FSIC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
- 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 Capital Markets industry average. The net income has significantly decreased by 25.4% when compared to the same quarter one year ago, falling from $69.31 million to $51.71 million.
- You can view the full FS Investment Ratings Report.
- AMERICAN CAPITAL SR FLTG LTD has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.29 versus $0.37).
- 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 10.8% when compared to the same quarter one year prior, going from $2.85 million to $3.16 million.
- When compared to other companies in the Capital Markets industry and the overall market, AMERICAN CAPITAL SR FLTG LTD's return on equity is below that of both the industry average and the S&P 500.
- ACSF has underperformed the S&P 500 Index, declining 9.66% 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 American Capital Senior Floating Ratings Report.
- Our dividend calendar.