Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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.
- The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 17.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for KKR FINANCIAL HOLDINGS LLC is currently very high, coming in at 77.40%. It has increased significantly from the same period last year. Along with this, the net profit margin of 40.33% significantly outperformed against the industry average.
- 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 Diversified Financial Services industry average. The net income increased by 11.7% when compared to the same quarter one year prior, going from $88.05 million to $98.34 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. Compared to other companies in the Diversified Financial Services industry and the overall market on the basis of return on equity, KKR FINANCIAL HOLDINGS LLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The debt-to-equity ratio is very high at 2.43 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full KKR Financial Holdings Ratings Report.
- FULL, with its decline in revenue, underperformed when compared the industry average of 5.3%. Since the same quarter one year prior, revenues fell by 22.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- FULL CIRCLE CAPITAL CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP reported lower earnings of $0.44 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.81 versus $0.44).
- The gross profit margin for FULL CIRCLE CAPITAL CORP is currently extremely low, coming in at 1.30%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -35.51% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$1.80 million or 146.56% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Full Circle Capital Corp BDC Ratings Report.
- EBR.B's very impressive revenue growth greatly exceeded the industry average of 13.0%. Since the same quarter one year prior, revenues leaped by 65.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.76 is somewhat weak and could be cause for future problems.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 64.03%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 31.37% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Electric Utilities industry. The net income has significantly decreased by 29.5% when compared to the same quarter one year ago, falling from $684.73 million to $482.78 million.
- You can view the full Centrais Eletricas Brasileiras Ratings Report.
- Our dividend calendar.