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 "Buy." Arlington Asset Investment (NYSE: AI) shares currently have a dividend yield of 12.70%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 1.56. The average volume for Arlington Asset Investment has been 341,500 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $439.6 million and is part of the real estate industry. Shares are up 34.9% year to date as of the close of trading on Thursday. TheStreet Ratings rates Arlington Asset Investment as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, ARLINGTON ASSET INVESTMENT's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 422.78% to $11.66 million when compared to the same quarter last year. In addition, ARLINGTON ASSET INVESTMENT has also vastly surpassed the industry average cash flow growth rate of -272.20%.
- AI's share price has surged by 27.08% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- AI, with its very weak revenue results, has greatly underperformed against the industry average of 6.4%. Since the same quarter one year prior, revenues plummeted by 70.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ARLINGTON ASSET INVESTMENT 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. 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, ARLINGTON ASSET INVESTMENT increased its bottom line by earning $15.11 versus $1.98 in the prior year. For the next year, the market is expecting a contraction of 73.1% in earnings ($4.07 versus $15.11).
- You can view the full Arlington Asset Investment Ratings Report.
- The revenue growth came in higher than the industry average of 14.1%. Since the same quarter one year prior, revenues rose by 10.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CLCT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, CLCT has a quick ratio of 1.95, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Diversified Consumer Services industry and the overall market, COLLECTORS UNIVERSE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for COLLECTORS UNIVERSE INC is rather high; currently it is at 66.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.42% significantly outperformed against the industry average.
- Net operating cash flow has increased to $3.92 million or 30.78% when compared to the same quarter last year. In addition, COLLECTORS UNIVERSE INC has also vastly surpassed the industry average cash flow growth rate of -25.46%.
- You can view the full Collectors Universe Ratings Report.
- The revenue growth came in higher than the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 16.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 27.58% and other important driving factors, this stock has surged by 94.79% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, OMAB should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- GRUPO AEROPORTUARIO DEL CENT has improved earnings per share by 27.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GRUPO AEROPORTUARIO DEL CENT increased its bottom line by earning $1.25 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $1.25).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Transportation Infrastructure industry. The net income increased by 27.4% when compared to the same quarter one year prior, rising from $14.38 million to $18.33 million.
- The gross profit margin for GRUPO AEROPORTUARIO DEL CENT is rather high; currently it is at 59.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.65% is above that of the industry average.
- You can view the full Central North Airport Group Ratings Report.
- Our dividend calendar.