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."Golub Capital BDC Dividend Yield: 7.60% Golub Capital BDC (NASDAQ: GBDC) shares currently have a dividend yield of 7.60%. Golub Capital BDC, Inc. is a business development company and operates as an externally managed closed-end non-diversified management investment company. It invests in debt and minority equity investments in middle-market companies that are, in most cases, sponsored by private equity investors. The company has a P/E ratio of 11.74. The average volume for Golub Capital BDC has been 173,800 shares per day over the past 30 days. Golub Capital BDC has a market cap of $868.8 million and is part of the financial services industry. Shares are up 0.4% 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 Golub Capital BDC as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.2%. Since the same quarter one year prior, revenues rose by 10.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 36.0% when compared to the same quarter one year prior, rising from $15.17 million to $20.64 million.
- Net operating cash flow has significantly increased by 156.34% to $23.02 million when compared to the same quarter last year. In addition, GOLUB CAPITAL BDC INC has also vastly surpassed the industry average cash flow growth rate of 88.31%.
- The gross profit margin for GOLUB CAPITAL BDC INC is currently very high, coming in at 72.24%. Regardless of GBDC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GBDC's net profit margin of 67.66% significantly outperformed against the industry.
- 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 Capital Markets industry and the overall market on the basis of return on equity, GOLUB CAPITAL BDC INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Golub Capital BDC Ratings Report.
- MNDO 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 3.38, which clearly demonstrates the ability to cover short-term cash needs.
- 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 Software industry and the overall market, MIND CTI LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- MIND CTI LTD has improved earnings per share by 33.3% 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, MIND CTI LTD increased its bottom line by earning $0.29 versus $0.11 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 Software industry. The net income increased by 27.6% when compared to the same quarter one year prior, rising from $1.14 million to $1.45 million.
- You can view the full Mind C T I Ratings Report.
- The revenue growth came in higher than the industry average of 13.2%. Since the same quarter one year prior, revenues slightly increased by 0.6%. 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.
- ITRN's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.36, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has slightly increased to $7.67 million or 6.76% when compared to the same quarter last year. Despite an increase in cash flow, ITURAN LOCATION & CONTROL's cash flow growth rate is still lower than the industry average growth rate of 19.02%.
- The gross profit margin for ITURAN LOCATION & CONTROL is rather high; currently it is at 59.64%. Regardless of ITRN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 14.11% trails the industry average.
- 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 Communications Equipment industry and the overall market, ITURAN LOCATION & CONTROL's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Ituran Location and Control Ratings Report.
- Our dividend calendar.