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." TCP Capital Dividend Yield: 10.00% TCP Capital (NASDAQ: TCPC) shares currently have a dividend yield of 10.00%. TCP Capital Corp. is a business development company specializing in direct equity and debt investments in middle-market, senior secured loans, junior loans, originated loans, mezzanine, senior debt instruments, bonds, and secondary-market investments. It seeks to invest in the United States. The company has a P/E ratio of 11.96. The average volume for TCP Capital has been 182,600 shares per day over the past 30 days. TCP Capital has a market cap of $702.4 million and is part of the financial services industry. Shares are up 3.4% 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 TCP Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 30.6%. 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 48.2% when compared to the same quarter one year prior, rising from $11.83 million to $17.53 million.
- The gross profit margin for TCP CAPITAL CORP is currently very high, coming in at 80.42%. Regardless of TCPC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCPC's net profit margin of 49.38% significantly outperformed against the industry.
- Net operating cash flow has significantly increased by 76.23% to -$38.35 million when compared to the same quarter last year. Despite an increase in cash flow of 76.23%, TCP CAPITAL CORP is still growing at a significantly lower rate than the industry average of 152.61%.
- TCP CAPITAL CORP has improved earnings per share by 24.1% 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, TCP CAPITAL CORP reported lower earnings of $0.96 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $0.96).
- You can view the full TCP Capital 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 27.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 Capital Markets industry and the overall market, OFS CAPITAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- 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 76.6% when compared to the same quarter one year prior, rising from $3.50 million to $6.18 million.
- The gross profit margin for OFS CAPITAL CORP is rather high; currently it is at 63.59%. Regardless of OFS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OFS's net profit margin of 69.60% significantly outperformed against the industry.
- Compared to where it was trading a year ago, OFS's share price has not changed very much due to (a) the relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and (c) other mixed results. 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.
- You can view the full OFS Capital Ratings Report.
- Compared to its closing price of one year ago, HIHO's share price has jumped by 43.53%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HIHO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- HIHO 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 2.61, which clearly demonstrates the ability to cover short-term cash needs.
- Despite the weak revenue results, HIHO has outperformed against the industry average of 20.0%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- HIGHWAY HOLDINGS LTD's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, HIGHWAY HOLDINGS LTD increased its bottom line by earning $0.31 versus $0.16 in the prior year.
- You can view the full Highway Holdings Ratings Report.
- Our dividend calendar.