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 and 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 4 stocks with substantial yields, that ultimately, we have rated "Buy." Apollo Commercial Real Estate Finance (NYSE: ARI) shares currently have a dividend yield of 10.10%. Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. The company has a P/E ratio of 10.29. The average volume for Apollo Commercial Real Estate Finance has been 420,600 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $584.6 million and is part of the real estate industry. Shares are down 0.1% year to date as of the close of trading on Friday. TheStreet Ratings rates Apollo Commercial Real Estate Finance as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 25.7%. 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 gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 77.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 65.79% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $11.92 million or 1.29% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.12%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 31.2% when compared to the same quarter one year prior, rising from $9.09 million to $11.93 million.
- APOLLO COMMERCIAL RE FIN INC's earnings per share declined by 23.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APOLLO COMMERCIAL RE FIN INC increased its bottom line by earning $1.68 versus $1.34 in the prior year. For the next year, the market is expecting a contraction of 7.7% in earnings ($1.55 versus $1.68).
- You can view the full Apollo Commercial Real Estate Finance Ratings Report.
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