Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.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 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 5 stocks with substantial yields, that ultimately, we have rated "Buy."Arlington Asset Investment (NYSE:AI) shares currently have a dividend yield of 15.30%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 1.30.The average volume for Arlington Asset Investment has been 186,700 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $367.4 million and is part of the real estate industry. Shares are up 13% year to date as of the close of trading on Tuesday.TheStreet Ratings rates Arlington Asset Investment as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, expanding profit margins, compelling growth in net income and increase in stock price during the past year. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.Highlights from the ratings report include:
- AI's very impressive revenue growth greatly exceeded the industry average of 12.5%. Since the same quarter one year prior, revenues leaped by 61.7%. 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, ARLINGTON ASSET INVESTMENT's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for ARLINGTON ASSET INVESTMENT is rather high; currently it is at 67.04%. It has increased significantly from the same period last year. Along with this, the net profit margin of 26.85% significantly outperformed against the industry average.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 49.0% when compared to the same quarter one year prior, rising from $2.14 million to $3.19 million.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full Arlington Asset Investment Ratings Report.
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