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 3 stocks with substantial yields, that ultimately, we have rated "Sell." AG Mortgage Investment (NYSE: MITT) shares currently have a dividend yield of 12.50%. AG Mortgage Investment Trust, Inc., a real estate investment trust, focuses on investing, acquiring, and managing a portfolio of residential mortgage assets, and other real estate-related securities and financial assets. The company has a P/E ratio of 3.72. The average volume for AG Mortgage Investment has been 376,200 shares per day over the past 30 days. AG Mortgage Investment has a market cap of $716.5 million and is part of the real estate industry. Shares are up 9% year to date as of the close of trading on Monday. TheStreet Ratings rates AG Mortgage Investment as a sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share. Highlights from the ratings report include:
- AG MORTGAGE INVESTMENT TRUST's earnings per share declined by 36.4% 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, AG MORTGAGE INVESTMENT TRUST increased its bottom line by earning $7.34 versus $2.01 in the prior year. For the next year, the market is expecting a contraction of 56.4% in earnings ($3.20 versus $7.34).
- The gross profit margin for AG MORTGAGE INVESTMENT TRUST is currently very high, coming in at 88.50%. Regardless of MITT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MITT's net profit margin of 33.68% compares favorably to the industry average.
- MITT's share price has surged by 26.70% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the future course of this stock, we feel that the risks involved in investing in MITT do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 53.1% when compared to the same quarter one year prior, rising from $10.95 million to $16.77 million.
- You can view the full AG Mortgage Investment Ratings Report.