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." OFS Capital Dividend Yield: 11.00% OFS Capital (NASDAQ: OFS) shares currently have a dividend yield of 11.00%. OFS Capital Corporation is a business development company specializing in direct and fund investments. For direct, it specializes in debt and structured equity investments in lower middle market companies. The fund invests in companies based in United States. The company has a P/E ratio of 6.85. The average volume for OFS Capital has been 38,100 shares per day over the past 30 days. OFS Capital has a market cap of $119.6 million and is part of the financial services industry. Shares are up 12.1% 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 OFS Capital as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, solid stock price performance, compelling growth in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 2.5%. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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 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.
- You can view the full OFS Capital Ratings Report.
- The revenue growth came in higher than the industry average of 2.5%. 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.
- 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.
- Net operating cash flow has significantly increased by 156.34% to $23.02 million when compared to the same quarter last year. Despite an increase in cash flow of 156.34%, GOLUB CAPITAL BDC INC is still growing at a significantly lower rate than the industry average of 399.27%.
- 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.
- TOOTSIE ROLL INDUSTRIES INC has improved earnings per share by 9.9% 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, TOOTSIE ROLL INDUSTRIES INC increased its bottom line by earning $1.05 versus $0.99 in the prior year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- TR's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.09, which clearly demonstrates the ability to cover short-term cash needs.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- 41.66% is the gross profit margin for TOOTSIE ROLL INDUSTRIES INC which we consider to be strong. Regardless of TR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TR's net profit margin of 14.00% compares favorably to the industry average.
- You can view the full Tootsie Roll Industries Ratings Report.
- Our dividend calendar.