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 3 stocks with substantial yields, that ultimately, we have rated "Sell." Apollo Global Management (NYSE: APO) shares currently have a dividend yield of 19.40%. Apollo Global Management, LLC is a publicly owned investment manager. The firm primarily provides its services to pension and endowment funds, institutional investors, individual investors, pooled investment vehicles, and corporations. The company has a P/E ratio of 10.52. Currently there are 5 analysts that rate Apollo Global Management a buy, no analysts rate it a sell, and 3 rate it a hold. The average volume for Apollo Global Management has been 726,800 shares per day over the past 30 days. Apollo Global Management has a market cap of $2.9 billion and is part of the financial services industry. Shares are up 27.7% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Apollo Global Management as a sell. Among the areas we feel are negative, one of the most important has been weak operating cash flow. Highlights from the ratings report include:
- Net operating cash flow has significantly decreased to -$194.88 million or 316.52% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 on the basis of return on equity, APOLLO GLOBAL MANAGEMENT LLC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 42.80% is the gross profit margin for APOLLO GLOBAL MANAGEMENT LLC which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.79% trails the industry average.
- This stock has increased by 53.22% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in APO do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- You can view the full Apollo Global Management Ratings Report.