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 "Hold." Capstead Mortgage Corporation (NYSE: CMO) shares currently have a dividend yield of 9.60%. Capstead Mortgage Corporation operates as a self-managed real estate investment trust. The company has a P/E ratio of 8.63. Currently there is 1 analyst that rates Capstead Mortgage Corporation a buy, no analysts rate it a sell, and 5 rate it a hold. The average volume for Capstead Mortgage Corporation has been 759,300 shares per day over the past 30 days. Capstead Mortgage Corporation has a market cap of $1.2 billion and is part of the real estate industry. Shares are up 12.2% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Capstead Mortgage Corporation as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for CAPSTEAD MORTGAGE CORP is currently very high, coming in at 94.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 57.32% significantly outperformed against the industry average.
- CMO, with its decline in revenue, underperformed when compared the industry average of 16.4%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CAPSTEAD MORTGAGE CORP's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $70.33 million or 13.67% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Capstead Mortgage Corporation Ratings Report.
- The revenue growth came in higher than the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 4.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
- NAVIOS MARITIME PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NAVIOS MARITIME PARTNERS LP increased its bottom line by earning $1.64 versus $1.19 in the prior year. For the next year, the market is expecting a contraction of 47.0% in earnings ($0.87 versus $1.64).
- NMM has underperformed the S&P 500 Index, declining 11.57% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full Navios Maritime Partners L.P Ratings Report.
- The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 10.8%. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 100.5% when compared to the same quarter one year prior, rising from -$60.54 million to $0.32 million.
- The debt-to-equity ratio is very high at 11.09 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, NTLS has managed to keep a strong quick ratio of 2.01, which demonstrates the ability to cover short-term cash needs.
- The gross profit margin for NTELOS HOLDINGS CORP is currently lower than what is desirable, coming in at 27.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.27% significantly trails the industry average.
- You can view the full NTELOS Holdings Ratings Report.
- MEMP's very impressive revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues leaped by 110.6%. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 74.7% when compared to the same quarter one year prior, rising from $6.34 million to $11.08 million.
- Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MEMORIAL PRODUCTION PRTRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- MEMORIAL PRODUCTION PRTRS LP's earnings per share declined by 36.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MEMORIAL PRODUCTION PRTRS LP swung to a loss, reporting -$0.01 versus $0.30 in the prior year. This year, the market expects an improvement in earnings ($1.88 versus -$0.01).
- The debt-to-equity ratio of 1.15 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- You can view the full Memorial Production Partners Ratings Report.
- Our dividend calendar.