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 "Sell." Apollo Residential Mortgage (NYSE: AMTG) shares currently have a dividend yield of 10.70%. Apollo Residential Mortgage, Inc. operates as a residential real estate trust that invests in, finances, and manages residential mortgage assets in the United States. Its investment portfolio includes agency and non-agency residential mortgage-backed securities. The average volume for Apollo Residential Mortgage has been 439,600 shares per day over the past 30 days. Apollo Residential Mortgage has a market cap of $477.7 million and is part of the real estate industry. Shares are down 25.7% year to date as of the close of trading on Friday. TheStreet Ratings rates Apollo Residential Mortgage as a sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share. Highlights from the ratings report include:
- APOLLO RESIDENTIAL MTG INC 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. For the next year, the market is expecting a contraction of 74.1% in earnings ($2.12 versus $8.19).
- The net income has significantly decreased by 83.4% when compared to the same quarter one year ago, falling from $70.40 million to $11.69 million.
- The gross profit margin for APOLLO RESIDENTIAL MTG INC is currently very high, coming in at 82.48%. Regardless of AMTG's high profit margin, it has managed to decrease from the same period last year.
- Compared to where it was trading one year ago, AMTG is down 27.20% to its most recent closing price of 14.91. Looking ahead, our view is that this stock still does not have good upside potential and may even suffer further declines.
- Net operating cash flow has significantly increased by 59.47% to $18.88 million when compared to the same quarter last year.
- You can view the full Apollo Residential Mortgage Ratings Report.
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