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."Pzena Investment Management Dividend Yield: 17.10% Pzena Investment Management (NYSE: PZN) shares currently have a dividend yield of 17.10%. Pzena Investment Management, Inc. is a publicly owned investment manager. The company has a P/E ratio of 14.36. The average volume for Pzena Investment Management has been 53,500 shares per day over the past 30 days. Pzena Investment Management has a market cap of $502.9 million and is part of the financial services industry. Shares are down 13.1% 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 Pzena Investment Management as a buy. The company's strengths can be seen in multiple areas, such as its 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:
- 46.93% is the gross profit margin for PZENA INVESTMENT MANAGEMENT which we consider to be strong. Regardless of PZN'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 7.99% trails the industry average.
- PZN, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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, PZENA INVESTMENT MANAGEMENT's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Capital Markets industry average. The net income has decreased by 10.4% when compared to the same quarter one year ago, dropping from $2.47 million to $2.21 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, PZN has underperformed the S&P 500 Index, declining 19.35% from its price level of one year ago. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
- You can view the full Pzena Investment Management Ratings Report.
- The revenue growth came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 17.1%. 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 298.9% when compared to the same quarter one year prior, rising from $0.44 million to $1.75 million.
- PENNANTPARK FLOATING RT CAP reported significant earnings per share improvement in the most recent quarter compared to 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, PENNANTPARK FLOATING RT CAP reported lower earnings of $0.82 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.82).
- The gross profit margin for PENNANTPARK FLOATING RT CAP is currently very high, coming in at 79.18%. Regardless of PFLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFLT's net profit margin of 19.94% compares favorably to the industry average.
- PFLT has underperformed the S&P 500 Index, declining 17.33% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full PennantPark Floating Rate Capital Ratings Report.
- BKCC's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 2.3%. 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 BLACKROCK CAPITAL INVT CORP is currently very high, coming in at 88.43%. It has increased significantly from the same period last year. Along with this, the net profit margin of 64.01% significantly outperformed against the industry average.
- After a year of stock price fluctuations, the net result is that BKCC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 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, BLACKROCK CAPITAL INVT CORP's return on equity exceeds that of both the industry average and the S&P 500.
- BLACKROCK CAPITAL INVT CORP's earnings per share declined by 22.2% in the most recent quarter compared to 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, BLACKROCK CAPITAL INVT CORP increased its bottom line by earning $1.70 versus $1.20 in the prior year. For the next year, the market is expecting a contraction of 40.6% in earnings ($1.01 versus $1.70).
- You can view the full BlackRock Capital Investment Ratings Report.
- Our dividend calendar.