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."Quad/Graphics Dividend Yield: 9.10% Quad/Graphics (NYSE: QUAD) shares currently have a dividend yield of 9.10%. Quad/Graphics, Inc., together with its subsidiaries, provides print and media solutions in the United States, Europe, and Latin America. The average volume for Quad/Graphics has been 237,500 shares per day over the past 30 days. Quad/Graphics has a market cap of $467.4 million and is part of the diversified services industry. Shares are down 45.6% 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 Quad/Graphics as a hold. Among the primary strengths of the company is its generally strong cash flow from operations. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has increased to $59.20 million or 28.97% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 16.75%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- QUAD/GRAPHICS INC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, QUAD/GRAPHICS INC reported lower earnings of $0.36 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($1.06 versus $0.36).
- The debt-to-equity ratio of 1.44 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, QUAD maintains a poor quick ratio of 0.87, which illustrates the inability to avoid short-term cash problems.
- 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 Commercial Services & Supplies industry and the overall market, QUAD/GRAPHICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Quad/Graphics Ratings Report.
- ACSF's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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).
- 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 8.37% 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.
- The gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 60.54%. Regardless of HRZN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HRZN's net profit margin of 25.44% compares favorably to the industry average.
- HRZN, with its decline in revenue, underperformed when compared the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 21.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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, HORIZON TECHNOLOGY FINANCE's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$34.05 million or 558.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 28.3% when compared to the same quarter one year ago, falling from $2.44 million to $1.75 million.
- You can view the full Horizon Technology Finance Ratings Report.
- Our dividend calendar.