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." Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 12.30%. Invesco Mortgage Capital Inc., a real estate investment trust (REIT), focuses on investing in, financing, and managing residential and commercial mortgage-backed securities and mortgage loans. It invests in residential mortgage-backed securities for which a U.S. The company has a P/E ratio of 7.29. The average volume for Invesco Mortgage Capital has been 2,150,400 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $2.8 billion and is part of the real estate industry. Shares are up 6.2% year to date as of the close of trading on Friday. TheStreet Ratings rates Invesco Mortgage Capital as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 22.0% when compared to the same quarter one year prior, going from $75.59 million to $92.23 million.
- Net operating cash flow has increased to $118.39 million or 15.03% when compared to the same quarter last year. Despite an increase in cash flow, INVESCO MORTGAGE CAPITAL INC's cash flow growth rate is still lower than the industry average growth rate of 38.55%.
- INVESCO MORTGAGE CAPITAL INC 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, INVESCO MORTGAGE CAPITAL INC reported lower earnings of $2.89 versus $3.45 in the prior year. For the next year, the market is expecting a contraction of 9.5% in earnings ($2.62 versus $2.89).
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, INVESCO MORTGAGE CAPITAL INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Invesco Mortgage Capital Ratings Report.