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 "Buy." Apollo Commercial Real Estate Finance (NYSE: ARI) shares currently have a dividend yield of 9.10%. Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. The company has a P/E ratio of 10.73. Currently there are 5 analysts that rate Apollo Commercial Real Estate Finance a buy, no analysts rate it a sell, and 3 rate it a hold. The average volume for Apollo Commercial Real Estate Finance has been 536,700 shares per day over the past 30 days. Apollo Commercial Real Estate Finance has a market cap of $493.6 million and is part of the real estate industry. Shares are up 8.4% year to date as of the close of trading on Thursday. TheStreet Ratings rates Apollo Commercial Real Estate Finance as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for APOLLO COMMERCIAL RE FIN INC is currently very high, coming in at 75.60%. Regardless of ARI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARI's net profit margin of 65.11% significantly outperformed against the industry.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 3.4% when compared to the same quarter one year prior, going from $8.67 million to $8.97 million.
- ARI, 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 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- APOLLO COMMERCIAL RE FIN INC's earnings per share declined by 35.0% 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, APOLLO COMMERCIAL RE FIN INC increased its bottom line by earning $1.68 versus $1.34 in the prior year. For the next year, the market is expecting a contraction of 4.8% in earnings ($1.60 versus $1.68).
- You can view the full Apollo Commercial Real Estate Finance Ratings Report.