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." Solar Capital Dividend Yield: 8.70% Solar Capital (NASDAQ: SLRC) shares currently have a dividend yield of 8.70%. Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 23.39. The average volume for Solar Capital has been 116,200 shares per day over the past 30 days. Solar Capital has a market cap of $780.8 million and is part of the financial services industry. Shares are up 13% year-to-date as of the close of trading on Friday. 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 Solar Capital as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins 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 24.5%. Since the same quarter one year prior, revenues rose by 32.8%. Growth in the company's revenue appears to have helped boost 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 158.5% when compared to the same quarter one year prior, rising from $10.90 million to $28.18 million.
- Net operating cash flow has significantly increased by 95.70% to -$1.02 million when compared to the same quarter last year. In addition, SOLAR CAPITAL LTD has also vastly surpassed the industry average cash flow growth rate of -198.08%.
- The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 64.46%. Regardless of SLRC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLRC's net profit margin of 82.79% significantly outperformed against the industry.
- SOLAR CAPITAL LTD reported significant earnings per share improvement 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, SOLAR CAPITAL LTD reported lower earnings of $0.34 versus $1.12 in the prior year. This year, the market expects an improvement in earnings ($1.66 versus $0.34).
- You can view the full Solar Capital Ratings Report.