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."Hudson Global Dividend Yield: 9.00% Hudson Global (NASDAQ: HSON) shares currently have a dividend yield of 9.00%. Hudson Global, Inc. provides professional-level recruitment and related talent solutions for small to large-sized corporations and government agencies worldwide. The company has a P/E ratio of 14.73. The average volume for Hudson Global has been 36,700 shares per day over the past 30 days. Hudson Global has a market cap of $76.0 million and is part of the diversified services industry. Shares are down 22.3% 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 Hudson Global as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Professional Services industry. The net income increased by 49.0% when compared to the same quarter one year prior, rising from -$6.84 million to -$3.49 million.
- HSON's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, HSON has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.
- 40.76% is the gross profit margin for HUDSON GLOBAL INC which we consider to be strong. 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 -3.44% is in-line with the industry average.
- After a year of stock price fluctuations, the net result is that HSON'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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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. When compared to other companies in the Professional Services industry and the overall market, HUDSON GLOBAL INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Hudson Global Ratings Report.
- The gross profit margin for FS INVESTMENT CORP is rather high; currently it is at 66.79%. 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 -11.73% is in-line with the industry average.
- Despite the weak revenue results, FSIC has outperformed against the industry average of 24.3%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FS INVESTMENT CORP 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 reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FS INVESTMENT CORP reported lower earnings of $0.16 versus $0.78 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus $0.16).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 117.2% when compared to the same quarter one year ago, falling from $70.43 million to -$12.10 million.
- 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, FS INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full FS Investment Ratings Report.
- The revenue growth greatly exceeded the industry average of 2.1%. Since the same quarter one year prior, revenues rose by 28.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RWC 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. To add to this, RWC has a quick ratio of 2.06, which demonstrates the ability of the company to cover short-term liquidity needs.
- 42.35% is the gross profit margin for RELM WIRELESS CORP which we consider to be strong. Regardless of RWC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RWC's net profit margin of 3.05% is significantly lower than the industry average.
- 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. When compared to other companies in the Communications Equipment industry and the overall market, RELM WIRELESS CORP's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$2.99 million or 545.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full RELM Wireless Ratings Report.
- Our dividend calendar.