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."Fifth Street Finance Corporation Dividend Yield: 11.10% Fifth Street Finance Corporation (NASDAQ: FSC) shares currently have a dividend yield of 11.10%. Fifth Street Finance Corp. The company has a P/E ratio of 8.14. The average volume for Fifth Street Finance Corporation has been 981,900 shares per day over the past 30 days. Fifth Street Finance Corporation has a market cap of $998.2 million and is part of the financial services industry. Shares are down 18.5% year-to-date as of the close of trading on Wednesday. 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 Fifth Street Finance Corporation as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Capital Markets industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $20.29 million to $20.45 million.
- Net operating cash flow has significantly increased by 176.55% to $296.65 million when compared to the same quarter last year. In addition, FIFTH STREET FINANCE CORP has also vastly surpassed the industry average cash flow growth rate of -425.92%.
- The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 66.50%. Regardless of FSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FSC's net profit margin of 29.13% significantly outperformed against the industry.
- Looking at the price performance of FSC's shares over the past 12 months, there is not much good news to report: the stock is down 32.08%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, FIFTH STREET FINANCE CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Fifth Street Finance Corporation Ratings Report.
- SJT 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.
- The gross profit margin for SAN JUAN BASIN ROYALTY TR is currently very high, coming in at 100.00%. SJT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, SJT's net profit margin of 62.54% significantly outperformed against the industry.
- SAN JUAN BASIN ROYALTY TR has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SAN JUAN BASIN ROYALTY TR increased its bottom line by earning $1.29 versus $0.78 in the prior year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 49.44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 92.10% compared to the year-earlier 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.
- 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 92.0% when compared to the same quarter one year ago, falling from $17.71 million to $1.42 million.
- You can view the full San Juan Basin Royalty Ratings Report.
- The revenue growth greatly exceeded the industry average of 34.6%. Since the same quarter one year prior, revenues slightly increased by 1.0%. 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.
- 36.68% is the gross profit margin for ALLIANCE HOLDINGS GP LP which we consider to be strong. Regardless of AHGP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AHGP's net profit margin of 10.08% compares favorably to the industry average.
- Currently the debt-to-equity ratio of 1.50 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, AHGP's quick ratio is somewhat strong at 1.14, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has decreased to $176.67 million or 26.04% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ALLIANCE HOLDINGS GP LP has marginally lower results.
- You can view the full Alliance Holdings GP Ratings Report.
- Our dividend calendar.