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." America First Tax Exempt Investors L.P (NASDAQ: ATAX) shares currently have a dividend yield of 7.10%. America First Tax Exempt Investors, L.P. engages in acquiring, holding, selling, and dealing with a portfolio of federally tax-exempt mortgage revenue bonds, which have been issued to provide construction and/or permanent financing of multifamily residential apartments. The company has a P/E ratio of 78.33. The average volume for America First Tax Exempt Investors L.P has been 92,000 shares per day over the past 30 days. America First Tax Exempt Investors L.P has a market cap of $301.5 million and is part of the real estate industry. Shares are up 5.7% year to date as of the close of trading on Wednesday. TheStreet Ratings rates America First Tax Exempt Investors L.P as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 11.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- This stock has managed to rise its share value by 27.50% over the past twelve months. Although ATAX had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The gross profit margin for AMERICA FIRST TAX EX IVS -LP is rather high; currently it is at 63.90%. Regardless of ATAX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ATAX's net profit margin of 31.02% significantly outperformed against the industry.
- Net operating cash flow has significantly decreased to -$0.53 million or 113.17% when compared to the same quarter last year. Despite a decrease in cash flow of 113.17%, AMERICA FIRST TAX EX IVS -LP is still significantly exceeding the industry average of -173.46%.
- 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 Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, AMERICA FIRST TAX EX IVS -LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full America First Tax Exempt Investors L.P Ratings Report.