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." Anworth Mortgage Asset Corporation (NYSE: ANH) shares currently have a dividend yield of 11.60%. Anworth Mortgage Asset Corporation operates as a real estate investment trust in the United States. The company primarily invests in the United States agency mortgage-backed securities, which are securities representing obligations guaranteed by the U.S. The company has a P/E ratio of 8.32. The average volume for Anworth Mortgage Asset Corporation has been 1,436,200 shares per day over the past 30 days. Anworth Mortgage Asset Corporation has a market cap of $747.5 million and is part of the real estate industry. Shares are down 10.9% year to date as of the close of trading on Monday. TheStreet Ratings rates Anworth Mortgage Asset Corporation as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations and expanding profit margins. 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:
- Net operating cash flow has increased to $313.89 million or 14.03% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.85%.
- The gross profit margin for ANWORTH MTG ASSET CORP is currently very high, coming in at 91.01%. Regardless of ANH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ANH's net profit margin of 54.18% significantly outperformed against the industry.
- The change in net income from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income has decreased by 18.9% when compared to the same quarter one year ago, dropping from $29.12 million to $23.62 million.
- ANWORTH MTG ASSET CORP's earnings per share declined by 25.0% 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, ANWORTH MTG ASSET CORP reported lower earnings of $0.68 versus $0.90 in the prior year. For the next year, the market is expecting a contraction of 22.1% in earnings ($0.53 versus $0.68).
- You can view the full Anworth Mortgage Asset Corporation 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 53.27%. 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 5.9%. 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 1.3%. 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.
- CVR PARTNERS LP has improved earnings per share by 19.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CVR PARTNERS LP reported lower earnings of $1.53 versus $1.81 in the prior year. This year, the market expects an improvement in earnings ($1.93 versus $1.53).
- 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.
- UAN has underperformed the S&P 500 Index, declining 9.18% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full CVR Partners Ratings Report.
- Our dividend calendar.