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 5 stocks with substantial yields, that ultimately, we have rated "Hold." Capstead Mortgage Corporation (NYSE: CMO) shares currently have a dividend yield of 9.90%. Capstead Mortgage Corporation operates as a real estate investment trust in the United States. The company has a P/E ratio of 9.16. The average volume for Capstead Mortgage Corporation has been 778,700 shares per day over the past 30 days. Capstead Mortgage Corporation has a market cap of $1.2 billion and is part of the real estate industry. Shares are up 7% year to date as of the close of trading on Friday. TheStreet Ratings rates Capstead Mortgage Corporation as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for CAPSTEAD MORTGAGE CORP is currently very high, coming in at 94.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 59.57% significantly outperformed against the industry average.
- CMO, with its decline in revenue, underperformed when compared the industry average of 12.0%. Since the same quarter one year prior, revenues fell by 10.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CAPSTEAD MORTGAGE CORP's earnings per share declined by 29.5% 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, CAPSTEAD MORTGAGE CORP reported lower earnings of $1.50 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 13.0% in earnings ($1.31 versus $1.50).
- 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 Real Estate Investment Trusts (REITs) industry. The net income has decreased by 22.7% when compared to the same quarter one year ago, dropping from $45.17 million to $34.92 million.
- You can view the full Capstead Mortgage Corporation Ratings Report.
- When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MID-CON ENERGY PARTNERS -LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- MCEP's very impressive revenue growth greatly exceeded the industry average of 10.6%. Since the same quarter one year prior, revenues leaped by 79.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MID-CON ENERGY PARTNERS -LP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MID-CON ENERGY PARTNERS -LP increased its bottom line by earning $1.63 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($2.03 versus $1.63).
- 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The debt-to-equity ratio of 1.12 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, MCEP's quick ratio is somewhat strong at 1.10, demonstrating the ability to handle short-term liquidity needs.
- You can view the full Mid-Con Energy Partners Ratings Report.
- MARPS 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.
- The gross profit margin for MARINE PETROLEUM TRUST is currently very high, coming in at 100.00%. MARPS has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, MARPS's net profit margin of 95.41% significantly outperformed against the industry.
- MARINE PETROLEUM TRUST's earnings per share declined by 38.8% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MARINE PETROLEUM TRUST increased its bottom line by earning $1.92 versus $1.59 in the prior year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.02%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 38.77% 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 when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 38.0% when compared to the same quarter one year ago, falling from $0.97 million to $0.60 million.
- You can view the full Marine Petroleum Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Tobacco industry. The net income increased by 78.1% when compared to the same quarter one year prior, rising from -$7.69 million to -$1.68 million.
- The gross profit margin for VECTOR GROUP LTD is rather high; currently it is at 53.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.27% is in-line with the industry average.
- VGR, with its decline in revenue, slightly underperformed the industry average of 6.9%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- In its most recent trading session, VGR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- Net operating cash flow has significantly decreased to -$9.92 million or 124.44% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Vector Group Ratings Report.
- UAN's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- UAN's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.58, which clearly demonstrates the ability to cover short-term cash needs.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Chemicals industry average, but is greater than that of the S&P 500. The net income increased by 17.6% when compared to the same quarter one year prior, going from $30.24 million to $35.55 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Chemicals industry and the overall market, CVR PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full CVR Partners Ratings Report.
- Our dividend calendar.