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."Goldman Sachs BDC Dividend Yield: 9.10% Goldman Sachs BDC (NYSE: GSBD) shares currently have a dividend yield of 9.10%. Goldman Sachs BDC, Inc. is a business development company specializing in middle market and mezzanine investment in private companies. The average volume for Goldman Sachs BDC has been 98,200 shares per day over the past 30 days. Goldman Sachs BDC has a market cap of $719.0 million and is part of the real estate industry. Shares are up 4.4% 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 Goldman Sachs BDC as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 18.9%. 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 GOLDMAN SACHS BDC INC is currently very high, coming in at 77.36%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.23% is above that of the industry average.
- When compared to other companies in the Capital Markets industry and the overall market, GOLDMAN SACHS BDC INC's return on equity is below that of both the industry average and the S&P 500.
- The share price of GOLDMAN SACHS BDC INC is down 6.85% when compared to where it was trading one year earlier. This reflects both (a) the trend in the overall market as well as (b) the sharp decline in the company's earnings per share. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 61.5% when compared to the same quarter one year ago, falling from $14.03 million to $5.40 million.
- You can view the full Goldman Sachs BDC Ratings Report.
- The gross profit margin for TEXTAINER GROUP HOLDINGS LTD is currently very high, coming in at 84.75%. Regardless of TGH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TGH's net profit margin of -2.63% significantly underperformed when compared to the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, TEXTAINER GROUP HOLDINGS LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has decreased to $70.58 million or 20.66% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Textainer Group Holdings Ratings Report.
- The gross profit margin for PENNANTPARK INVESTMENT CORP is currently very high, coming in at 71.02%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.09% trails the industry average.
- Despite the weak revenue results, PNNT has outperformed against the industry average of 24.3%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- PENNANTPARK INVESTMENT CORP's earnings per share declined by 40.0% 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, PENNANTPARK INVESTMENT CORP swung to a loss, reporting -$0.13 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus -$0.13).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 35.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 40.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Pennant Park Investment Ratings Report.
- Our dividend calendar.