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."Triangle Capital Dividend Yield: 11.30% Triangle Capital (NYSE: TCAP) shares currently have a dividend yield of 11.30%. Triangle Capital Corporation is a business development company specializing in private equity and mezzanine investments. The company has a P/E ratio of 9.25. The average volume for Triangle Capital has been 158,600 shares per day over the past 30 days. Triangle Capital has a market cap of $641.8 million and is part of the financial services industry. Shares are down 3.9% 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 Triangle Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.5%. Since the same quarter one year prior, revenues rose by 24.0%. Growth in the company's revenue appears to have helped boost 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 302.8% when compared to the same quarter one year prior, rising from -$8.81 million to $17.87 million.
- Net operating cash flow has increased to -$78.57 million or 31.69% when compared to the same quarter last year. Despite an increase in cash flow of 31.69%, TRIANGLE CAPITAL CORP is still growing at a significantly lower rate than the industry average of 142.81%.
- TCAP has underperformed the S&P 500 Index, declining 21.08% 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.
- 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, TRIANGLE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Triangle Capital Ratings Report.
- The gross profit margin for ELLINGTON FINANCIAL LLC is rather high; currently it is at 69.28%. Regardless of EFC'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 7.40% trails the industry average.
- EFC, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues fell by 16.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- ELLINGTON FINANCIAL LLC's earnings per share declined by 37.5% in the most recent quarter compared to 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, ELLINGTON FINANCIAL LLC reported lower earnings of $1.13 versus $2.23 in the prior year. This year, the market expects an improvement in earnings ($2.21 versus $1.13).
- The share price of ELLINGTON FINANCIAL LLC has not done very well: it is down 14.94% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- 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, ELLINGTON FINANCIAL LLC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Ellington Financial Ratings Report.
- BPT 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 3.35, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 98.87% significantly outperformed against the industry.
- Along with the very weak revenue results, BPT underperformed when compared to the industry average of 34.5%. Since the same quarter one year prior, revenues plummeted by 51.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- BP PRUDHOE BAY ROYALTY TRUST 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BP PRUDHOE BAY ROYALTY TRUST increased its bottom line by earning $10.60 versus $9.04 in the prior year. For the next year, the market is expecting a contraction of 60.2% in earnings ($4.22 versus $10.60).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 57.41%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 51.48% 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.
- You can view the full BP Prudhoe Bay Royalty Ratings Report.
- Our dividend calendar.