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."Main Street Capital Dividend Yield: 6.90% Main Street Capital (NYSE: MAIN) shares currently have a dividend yield of 6.90%. Main Street Capital Corporation is a business development company specializing in long- term equity and debt investments in small and lower middle market companies. The company has a P/E ratio of 14.21. The average volume for Main Street Capital has been 316,300 shares per day over the past 30 days. Main Street Capital has a market cap of $1.6 billion and is part of the financial services industry. Shares are up 6.2% year-to-date as of the close of trading on Monday. 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 Main Street Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, expanding profit margins and reasonable valuation levels. We feel its strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.8%. Since the same quarter one year prior, revenues rose by 12.2%. 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.
- Net operating cash flow has significantly increased by 311.16% to $72.10 million when compared to the same quarter last year. In addition, MAIN STREET CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of 143.97%.
- After a year of stock price fluctuations, the net result is that MAIN'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 gross profit margin for MAIN STREET CAPITAL CORP is currently very high, coming in at 84.79%. Regardless of MAIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MAIN's net profit margin of 17.34% compares favorably to the industry average.
- You can view the full Main Street Capital Ratings Report.
- Net operating cash flow has significantly increased by 345.61% to $1,013.56 million when compared to the same quarter last year. In addition, BLACKSTONE GROUP LP has also vastly surpassed the industry average cash flow growth rate of 143.97%.
- 42.28% is the gross profit margin for BLACKSTONE GROUP LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, BX's net profit margin of 22.38% compares favorably to the industry average.
- BLACKSTONE GROUP LP 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 suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BLACKSTONE GROUP LP reported lower earnings of $1.04 versus $2.59 in the prior year. This year, the market expects an improvement in earnings ($2.46 versus $1.04).
- BX, with its very weak revenue results, has greatly underperformed against the industry average of 1.8%. Since the same quarter one year prior, revenues plummeted by 55.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, BLACKSTONE GROUP LP 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 Blackstone Group Ratings Report.
- The revenue growth greatly exceeded the industry average of 34.6%. Since the same quarter one year prior, revenues rose by 20.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 5.09, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NORDIC AMERICAN TANKERS LTD's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The gross profit margin for NORDIC AMERICAN TANKERS LTD is rather high; currently it is at 51.99%. It has increased significantly from the same period last year. Along with this, the net profit margin of 26.32% significantly outperformed against the industry average.
- Net operating cash flow has increased to $35.19 million or 26.39% when compared to the same quarter last year. In addition, NORDIC AMERICAN TANKERS LTD has also vastly surpassed the industry average cash flow growth rate of -39.13%.
- You can view the full Nordic American Tankers Ratings Report.
- Our dividend calendar.