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 12.20%. Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company has a P/E ratio of 1.63. The average volume for Arlington Asset Investment has been 258,600 shares per day over the past 30 days. Arlington Asset Investment has a market cap of $458.0 million and is part of the real estate industry. Shares are up 35.4% year to date as of the close of trading on Wednesday. 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 increase in stock price during the past year. 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 -324.31%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- AI, with its very weak revenue results, has greatly underperformed against the industry average of 6.3%. 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 gross profit margin for CREXUS INVESTMENT CORP is rather high; currently it is at 62.40%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 61.15% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 106.93% to $11.69 million when compared to the same quarter last year. In addition, CREXUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -16.25%.
- CXS's share price has surged by 29.23% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CXS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- CREXUS INVESTMENT CORP's earnings per share declined by 10.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CREXUS INVESTMENT CORP reported lower earnings of $0.85 versus $1.59 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus $0.85).
- CXS, with its decline in revenue, underperformed when compared the industry average of 12.1%. Since the same quarter one year prior, revenues fell by 10.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full CreXus Investment Ratings Report.
- CLCT's revenue growth trails the industry average of 24.5%. 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. Regardless of the strong results of the gross profit margin, the net profit margin of 16.42% trails the industry average.
- COLLECTORS UNIVERSE INC has improved earnings per share by 31.8% 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. During the past fiscal year, COLLECTORS UNIVERSE INC increased its bottom line by earning $0.86 versus $0.64 in the prior year.
- You can view the full Collectors Universe Ratings Report.
- Our dividend calendar.