VimpelCom Ltd (ADR) (VIP), Penn West Petroleum Ltd (USA) (PWE): Can These High-Yield Companies Continue Their Growth Streak?

Backlog and strong dividend yield will boost investors’ confidence

Ares Capital Corporation (NASDAQ:ARCC) had $640 million worth of commitments in investment backlog, and $690 million in pipeline as of May 2013. Backlog includes signed commitments which are approved by the company’s advisor and which the company is likely to complete, whereas pipeline includes those transactions that are in process but aren’t committed yet.

Looking at pipeline requirements, the company issued fresh equity capital of $333 million in April 2013. It now has a total of $1.6 billion as low-cost credit facilities. These low-cost credit facilities will expand Ares Capital Corporation (NASDAQ:ARCC)’s margin from interest income up to $708 million in 2013, compared to $611 million in 2012.

The company’s growth rate is estimated at 8% per annum in three to five years looking at future commitments. It is also expected to earn $814 million in 2013, as compared to $748 million in 2012. In light of these strong cash flows, the company announced dividends of $0.38 per share for the second quarter on June 6, 2013. The company has a strong dividend-paying history since 2004. It’s anticipated that it will distribute its dividend at $1.65 per share by 2014, as compared to $1.50 per share in 2012. This high dividend yield comes from high revenue generation, both from interest and fees, and debt investments in various stocks.

Conclusion

The launch of a Russian 4G network and increasing operational efficiency will boost VimpelCom’s revenue in the future. This stock is a “buy.”

Penn West Petroleum Ltd (USA) (NYSE:PWE)’s cost-cutting and production strategies may lead the company to balance its profitability downfall. However, lack of stable revenue inflow in the future is still a drag. This stock is a “hold.”

Ares Capital Corporation (NASDAQ:ARCC) has good cash flow opportunities in the future, strong backlogs and a strong dividend history. This will boost the company’s earning potential and will continue to provide good yield in the years to come. This stock is a “buy.”

Shweta Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Can These High-Yield Companies Continue Their Growth Streak? originally appeared on Fool.com and is written by Shweta Dubey.

Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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