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 "Sell."Full Circle Capital Dividend Yield: 15.10% Full Circle Capital (NASDAQ: FULL) shares currently have a dividend yield of 15.10%. Full Circle Capital Corporation is a business development company specializing in debt and equity securities of smaller and lower middle-market companies. The average volume for Full Circle Capital has been 66,500 shares per day over the past 30 days. Full Circle Capital has a market cap of $62.5 million and is part of the financial services industry. Shares are down 39.6% 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 Full Circle Capital as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- 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 Capital Markets industry. The net income has significantly decreased by 2243.2% when compared to the same quarter one year ago, falling from $0.23 million to -$4.91 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market, FULL CIRCLE CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.58%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1150.00% 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.
- FULL, with its very weak revenue results, has greatly underperformed against the industry average of 5.6%. Since the same quarter one year prior, revenues plummeted by 204.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FULL CIRCLE CAPITAL CORP 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 reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP continued to lose money by earning -$0.41 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.41).
- You can view the full Full Circle Capital Ratings Report.
- NATURAL RESOURCE PARTNERS LP 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, NATURAL RESOURCE PARTNERS LP reported lower earnings of $0.96 versus $1.54 in the prior year. For the next year, the market is expecting a contraction of 21.9% in earnings ($0.75 versus $0.96).
- 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 1755.3% when compared to the same quarter one year ago, falling from $36.17 million to -$598.76 million.
- The debt-to-equity ratio is very high at 13.75 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, NRP maintains a poor quick ratio of 0.82, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NATURAL RESOURCE PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $55.24 million or 3.86% when compared to the same quarter last year. Despite a decrease in cash flow NATURAL RESOURCE PARTNERS LP is still fairing well by exceeding its industry average cash flow growth rate of -26.27%.
- You can view the full Natural Resources Partners Ratings Report.
- CNNX's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for CONE MIDSTREAM PARTNERS LP is rather high; currently it is at 69.84%. It has increased significantly from the same period last year. Along with this, the net profit margin of 36.57% significantly outperformed against the industry average.
- Net operating cash flow has improved to $38.81 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
- This stock's share value has moved by only 60.65% over the past year.
- CONE MIDSTREAM PARTNERS LP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. This year, the market expects an improvement in earnings ($1.13 versus $0.26).
- You can view the full CONE Midstream Partners Ratings Report.
- Our dividend calendar.