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."Solar Senior Capital Dividend Yield: 9.30% Solar Senior Capital (NASDAQ: SUNS) shares currently have a dividend yield of 9.30%. Solar Senior Capital Ltd. is a business development company specializing in investments in leveraged, middle-market companies in the United States. The fund invests in the form of senior secured loans, including first lien, unitranche, and second lien debt instruments. The company has a P/E ratio of 15.08. The average volume for Solar Senior Capital has been 23,400 shares per day over the past 30 days. Solar Senior Capital has a market cap of $175.7 million and is part of the financial services industry. Shares are up 1.7% 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 Solar Senior Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 22.5%. 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 SOLAR SENIOR CAPITAL LTD is currently very high, coming in at 76.38%. Regardless of SUNS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SUNS's net profit margin of -22.92% significantly underperformed when compared to the industry average.
- SOLAR SENIOR CAPITAL LTD 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, SOLAR SENIOR CAPITAL LTD reported lower earnings of $1.02 versus $1.11 in the prior year. This year, the market expects an improvement in earnings ($1.33 versus $1.02).
- 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 185.6% when compared to the same quarter one year ago, falling from $1.75 million to -$1.50 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. When compared to other companies in the Capital Markets industry and the overall market, SOLAR SENIOR CAPITAL LTD's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Solar Senior Capital Ratings Report.
- The revenue growth greatly exceeded the industry average of 30.9%. Since the same quarter one year prior, revenues slightly increased by 6.6%. 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 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 Energy Equipment & Services industry and the overall market on the basis of return on equity, ARCHROCK PARTNERS LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Currently the debt-to-equity ratio of 1.94 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, APLP has managed to keep a strong quick ratio of 2.22, which demonstrates the ability to cover short-term cash needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.85%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.69% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full Archrock Partners Ratings Report.
- The revenue growth came in higher than the industry average of 18.1%. Since the same quarter one year prior, revenues slightly increased by 6.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.80, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.70, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has increased to $41.40 million or 10.40% when compared to the same quarter last year. Despite an increase in cash flow, CINER RESOURCES LP's average is still marginally south of the industry average growth rate of 13.58%.
- The gross profit margin for CINER RESOURCES LP is currently lower than what is desirable, coming in at 32.54%. Regardless of CINR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CINR's net profit margin of 11.15% compares favorably to the industry average.
- CINR has underperformed the S&P 500 Index, declining 7.66% from its price level of one year ago. 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.
- You can view the full Ciner Resources Ratings Report.
- Our dividend calendar.