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."Highway Holdings Dividend Yield: 9.60% Highway Holdings (NASDAQ: HIHO) shares currently have a dividend yield of 9.60%. Highway Holdings Limited, through its subsidiaries, manufactures and sells metal, plastic, electric, and electronic components, subassemblies, and finished products for original equipment manufacturers (OEM) and contract manufacturers. The company has a P/E ratio of 26.06. The average volume for Highway Holdings has been 21,500 shares per day over the past 30 days. Highway Holdings has a market cap of $15.9 million and is part of the industrial industry. Shares are up 50.4% year-to-date as of the close of trading on Thursday. 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 Highway Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and compelling growth in net income. We feel its strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 14.8%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HIHO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.98, which clearly demonstrates the ability to cover short-term cash needs.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- HIGHWAY HOLDINGS LTD has improved earnings per share by 14.3% 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. During the past fiscal year, HIGHWAY HOLDINGS LTD increased its bottom line by earning $0.31 versus $0.16 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 18.0% when compared to the same quarter one year prior, going from $0.26 million to $0.30 million.
- You can view the full Highway Holdings Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry average. The net income increased by 5.0% when compared to the same quarter one year prior, going from $114.31 million to $120.07 million.
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems.
- 42.45% is the gross profit margin for SILICONWARE PRECISION INDS which we consider to be strong. 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 17.26% 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. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, SILICONWARE PRECISION INDS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full Siliconware Precision Industries Ratings Report.
- 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 116.4% when compared to the same quarter one year prior, rising from -$20.18 million to $3.31 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, GLADSTONE CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for GLADSTONE CAPITAL CORP is currently very high, coming in at 71.98%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 33.28% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 56.36% to $17.38 million when compared to the same quarter last year. In addition, GLADSTONE CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -428.75%.
- GLADSTONE CAPITAL 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, GLADSTONE CAPITAL CORP reported lower earnings of $0.53 versus $1.53 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.53).
- You can view the full Gladstone Capital Ratings Report.
- Our dividend calendar.