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."Fifth Street Finance Dividend Yield: 13.20% Fifth Street Finance (NASDAQ: FSC) shares currently have a dividend yield of 13.20%. Fifth Street Finance Corp. The company has a P/E ratio of 6.80. The average volume for Fifth Street Finance has been 604,000 shares per day over the past 30 days. Fifth Street Finance has a market cap of $790.5 million and is part of the financial services industry. Shares are down 15.1% year-to-date as of the close of trading on Tuesday. 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 Fifth Street Finance as a hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The gross profit margin for FIFTH STREET FINANCE CORP is rather high; currently it is at 65.78%. 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 8.36% trails the industry average.
- Despite the weak revenue results, FSC has outperformed against the industry average of 24.3%. Since the same quarter one year prior, revenues fell by 10.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- FIFTH STREET FINANCE 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIFTH STREET FINANCE CORP reported lower earnings of $0.11 versus $0.79 in the prior year. This year, the market expects an improvement in earnings ($0.70 versus $0.11).
- 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 80.7% when compared to the same quarter one year ago, falling from $25.74 million to $4.98 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 on the basis of return on equity, FIFTH STREET FINANCE CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Fifth Street Finance Ratings Report.
- The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 12.9%. 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 TRIPLEPOINT VENTURE GWTH BDC is currently very high, coming in at 76.92%. 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 -65.50% is in-line with the industry average.
- TRIPLEPOINT VENTURE GWTH BDC 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, TRIPLEPOINT VENTURE GWTH BDC reported lower earnings of $1.04 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.49 versus $1.04).
- Net operating cash flow has significantly decreased to -$19.21 million or 1451.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The share price of TRIPLEPOINT VENTURE GWTH BDC has not done very well: it is down 15.52% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- You can view the full TriplePoint Venture Growth BDC Ratings Report.
- The revenue growth came in higher than the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 10.8%. 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 Road & Rail industry. The net income increased by 99.1% when compared to the same quarter one year prior, rising from $1.89 million to $3.77 million.
- 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. 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, implying reduced upside potential.
- Currently the debt-to-equity ratio of 1.57 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, STB's quick ratio is somewhat strong at 1.33, demonstrating the ability to handle short-term liquidity needs.
- The gross profit margin for STUDENT TRANSPORTATION INC is currently lower than what is desirable, coming in at 25.68%. Regardless of STB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, STB's net profit margin of 2.17% is significantly lower than the industry average.
- You can view the full Student Transportation Ratings Report.
- Our dividend calendar.