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 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 "Sell."
Dividend Yield: 9.10%
) shares currently have a dividend yield of 9.10%.
Zais Financial Corp. invests in, finances, and manages performing and re-performing residential mortgage loans. The company also invests in, finances, and manages residential mortgage-backed securities (RMBS) that are not issued or guaranteed by a federally chartered corporation. The company has a P/E ratio of 4.26.
The average volume for ZAIS Financial has been 32,100 shares per day over the past 30 days. ZAIS Financial has a market cap of $139.6 million and is part of the real estate industry. Shares are up 10.5% year-to-date as of the close of trading on Friday.
Dividend Yield: 8.70%
) shares currently have a dividend yield of 8.70%.
Gladstone Commercial Corporation operates as a real estate investment trust (REIT) in the United States. It engages in investing in and owning net leased industrial and commercial real properties, and making long-term industrial and commercial mortgage loans.
The average volume for Gladstone Commercial has been 100,600 shares per day over the past 30 days. Gladstone Commercial has a market cap of $326.1 million and is part of the real estate industry. Shares are up 1.8% year-to-date as of the close of trading on Thursday.
TheStreet Ratings rates
. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share.
Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 25.7% when compared to the same quarter one year ago, falling from $0.31 million to $0.23 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, GLADSTONE COMMERCIAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $7.64 million or 4.95% when compared to the same quarter last year. Despite a decrease in cash flow of 4.95%, GLADSTONE COMMERCIAL CORP is still significantly exceeding the industry average of -55.11%.
- GLADSTONE COMMERCIAL CORP has improved earnings per share by 16.7% 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, GLADSTONE COMMERCIAL CORP reported poor results of -$0.22 versus -$0.05 in the prior year. For the next year, the market is expecting a contraction of 311.4% in earnings (-$0.91 versus -$0.22).
- In its most recent trading session, GOOD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- You can view the full Gladstone Commercial Ratings Report.
Dividend Yield: 11.90%
) shares currently have a dividend yield of 11.90%.
Atlantic Power Corporation owns and operates a fleet of power generation assets in the United States and Canada.
The average volume for Atlantic Power has been 890,300 shares per day over the past 30 days. Atlantic Power has a market cap of $322.6 million and is part of the utilities industry. Shares are down 2.2% year-to-date as of the close of trading on Thursday.
TheStreet Ratings rates
. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk.
Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income has significantly decreased by 115.3% when compared to the same quarter one year ago, falling from -$41.30 million to -$88.90 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market, ATLANTIC POWER CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 4.70 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AT's quick ratio is somewhat strong at 1.35, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has decreased to $40.40 million or 12.36% when compared to the same quarter last year. Despite a decrease in cash flow ATLANTIC POWER CORP is still fairing well by exceeding its industry average cash flow growth rate of -49.66%.
- ATLANTIC POWER CORP 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. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ATLANTIC POWER CORP continued to lose money by earning -$0.24 versus -$1.10 in the prior year.
- You can view the full Atlantic Power Ratings Report.
Other helpful dividend tools from TheStreet:
- Our dividend calendar.