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 "Buy." Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 13.30%. Annaly Capital Management, Inc. owns, manages, and finances a portfolio of real estate related investments in United States. The company has a P/E ratio of 8.04. The average volume for Annaly Capital Management has been 10,436,400 shares per day over the past 30 days. Annaly Capital Management has a market cap of $12.9 billion and is part of the real estate industry. Shares are down 3.8% year to date as of the close of trading on Monday. TheStreet Ratings rates Annaly Capital Management as a buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 94.50%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 92.42% significantly outperformed against the industry average.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ANNALY CAPITAL MANAGEMENT has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- ANNALY CAPITAL MANAGEMENT' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, ANNALY CAPITAL MANAGEMENT increased its bottom line by earning $1.69 versus $0.49 in the prior year. For the next year, the market is expecting a contraction of 13.6% in earnings ($1.46 versus $1.69).
- NLY, with its decline in revenue, underperformed when compared the industry average of 12.0%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Annaly Capital Management Ratings Report.