TheStreet Ratings’ stock model projects a stock’s total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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.” OFS Capital Dividend Yield: 10.30% OFS Capital (NASDAQ: OFS) shares currently have a dividend yield of 10.30%. OFS Capital Corporation is a business development company specializing in direct and fund investments. For direct, it specializes in debt and structured equity investments in lower middle market companies. The fund invests in companies based in United States. The company has a P/E ratio of 6.98. The average volume for OFS Capital has been 42,300 shares per day over the past 30 days. OFS Capital has a market cap of $127.9 million and is part of the financial services industry. Shares are up 13.2% 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 OFS Capital as a buy. The company’s strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, solid stock price performance, compelling growth in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 23.1%. Since the same quarter one year prior, revenues rose by 27.6%. Growth in the company’s revenue appears to have helped boost the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market, OFS CAPITAL CORP’s return on equity exceeds that of both the industry average and the S&P 500.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 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 76.6% when compared to the same quarter one year prior, rising from $3.50 million to $6.18 million.
- Net operating cash flow has significantly increased by 89.55% to -$5.31 million when compared to the same quarter last year. In addition, OFS CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -25.38%.
- You can view the full OFS Capital Ratings Report.
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