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 3 stocks with substantial yields, that ultimately, we have rated "Hold."Och-Ziff Capital Management Group (NYSE: OZM) shares currently have a dividend yield of 9.90%. Och-Ziff Capital Management Group LLC is a publicly owned investment manager. The firm provides investment advisory services for its clients. It invests in equity markets across the world. The firm makes its investments in alternative markets across the world. The average volume for Och-Ziff Capital Management Group has been 1,297,200 shares per day over the past 30 days. Och-Ziff Capital Management Group has a market cap of $1.7 billion and is part of the financial services industry. Shares are up 19.4% year to date as of the close of trading on Thursday. TheStreet Ratings rates Och-Ziff Capital Management Group as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- OZM's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 91.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 119.54% and other important driving factors, this stock has surged by 55.71% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Net operating cash flow has significantly increased by 1922.49% to $581.25 million when compared to the same quarter last year. In addition, OCH-ZIFF CAPITAL MGMT LP has also vastly surpassed the industry average cash flow growth rate of -272.20%.
- The gross profit margin for OCH-ZIFF CAPITAL MGMT LP is rather high; currently it is at 66.40%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.64% trails the industry average.
- You can view the full Och-Ziff Capital Management Group Ratings Report.
- Powered by its strong earnings growth of 86.48% and other important driving factors, this stock has surged by 63.95% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- REDWOOD TRUST INC reported significant earnings per share improvement 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. This trend suggests that the performance of the business is improving. During the past fiscal year, REDWOOD TRUST INC increased its bottom line by earning $1.59 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.59).
- The gross profit margin for REDWOOD TRUST INC is rather high; currently it is at 59.60%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, RWT's net profit margin of 113.23% significantly outperformed against the industry.
- RWT, with its decline in revenue, underperformed when compared the industry average of 12.1%. Since the same quarter one year prior, revenues slightly dropped by 8.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has decreased to -$287.03 million or 22.83% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, REDWOOD TRUST INC has marginally lower results.
- You can view the full Redwood Ratings Report.
- IVR's revenue growth has slightly outpaced the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 13.4%. 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.
- 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. 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'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.
- INVESCO MORTGAGE CAPITAL INC's earnings per share declined by 11.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue 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 13.5% in earnings ($2.50 versus $2.89).
- You can view the full Invesco Mortgage Capital Ratings Report.
- Our dividend calendar.