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." Capital Product Partners Dividend Yield: 10.00% Capital Product Partners (NASDAQ: CPLP) shares currently have a dividend yield of 10.00%. Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. The company has a P/E ratio of 7.87. The average volume for Capital Product Partners has been 1,318,900 shares per day over the past 30 days. Capital Product Partners has a market cap of $367.3 million and is part of the transportation industry. Shares are down 44.2% 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 Capital Product Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and good cash flow from operations. 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 revenue growth greatly exceeded the industry average of 24.5%. Since the same quarter one year prior, revenues rose by 18.7%. 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 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CAPITAL PRODUCT PARTNERS LP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 0.4% when compared to the same quarter one year ago, dropping from $12.15 million to $12.10 million.
- Looking at the price performance of CPLP's shares over the past 12 months, there is not much good news to report: the stock is down 65.50%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
- You can view the full Capital Product Partners Ratings Report.
- Net operating cash flow has slightly increased to $120.73 million or 6.36% when compared to the same quarter last year. In addition, APOLLO INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -198.08%.
- The gross profit margin for APOLLO INVESTMENT CORP is currently very high, coming in at 72.58%. 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 -27.41% is in-line with the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 24.5%. Since the same quarter one year prior, revenues fell by 16.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 99.5% when compared to the same quarter one year ago, falling from -$11.73 million to -$23.40 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, APOLLO INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Apollo Investment Ratings Report.
- Net operating cash flow has significantly increased by 188.99% to $105.98 million when compared to the same quarter last year. In addition, REDWOOD TRUST INC has also vastly surpassed the industry average cash flow growth rate of 11.94%.
- REDWOOD TRUST INC's earnings per share declined by 6.3% 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, REDWOOD TRUST INC increased its bottom line by earning $1.15 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $1.15).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RWT has underperformed the S&P 500 Index, declining 10.54% from its price level of one year ago. 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, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 18.5% when compared to the same quarter one year ago, dropping from $14.80 million to $12.06 million.
- You can view the full Redwood Ratings Report.
- Our dividend calendar.