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 "Hold." Anworth Mortgage Asset Corporation (NYSE: ANH) shares currently have a dividend yield of 9.50%. Anworth Mortgage Asset Corporation is a publicly owned real estate investment trust. The firm invests in the fixed income and real estate markets of the United States. The company has a P/E ratio of 9.45. Currently there are 3 analysts that rate Anworth Mortgage Asset Corporation a buy, no analysts rate it a sell, and 1 rates it a hold. The average volume for Anworth Mortgage Asset Corporation has been 1,251,000 shares per day over the past 30 days. Anworth Mortgage Asset Corporation has a market cap of $909.6 million and is part of the real estate industry. Shares are up 9.5% year to date as of the close of trading on Thursday. TheStreet Ratings rates Anworth Mortgage Asset Corporation as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations 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, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 116.21% to $14.32 million when compared to the same quarter last year. In addition, ANWORTH MTG ASSET CORP has also vastly surpassed the industry average cash flow growth rate of 38.95%.
- The gross profit margin for ANWORTH MTG ASSET CORP is currently very high, coming in at 92.10%. Regardless of ANH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ANH's net profit margin of 47.00% significantly outperformed against the industry.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 17.8% when compared to the same quarter one year ago, dropping from $28.39 million to $23.33 million.
- 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, ANWORTH MTG ASSET CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Anworth Mortgage Asset Corporation Ratings Report.